Lebanon’s central bank said it has entirely ceased providing dollars for gasoline imports in a move that will likely lead to higher and more volatile prices as well as increased pressure on the local currency which has been steadily losing value.
Although the central bank had said last year it would stop providing dollars at heavily-subsidised exchange rates due to dwindling foreign currency reserves, it continued to do so at a rate below market prices on its Sayrafa exchange platform.
But in recent weeks, it gradually reduced the amount of dollars it provided via Sayrafa, part of a wider plan to end subsidies for most goods amid a financial collapse that has entered its fourth year with no signs of easing.
A central bank spokesperson said importers will now have to source dollars from the black market, where the Lebanese pound was trading at around 35,000 pounds to the dollar on Monday. The Sayrafa rate sat around 28,000 last week.
“If there is more volatility in the exchange rate there will be more volatility in the fuel price,” Maroun Chammas, a member of the Association of Petroleum Importing Companies, told Reuters.
The price for 20 litres of gasoline jumped by 20,000 pounds on Monday, a significant increase compared to regular daily fluctuations of a few thousand pounds in the weeks prior.
Chammas said importers had so-far been able to source all the dollars they need from the black market and said gasoline pumps would continue to accept payment in Lebanese pounds at the daily black market rate.