A sharp drop in Lebanon's national currency is fuelling another surge in prices of essential commodities as the government scrambles to maintain subsidies on fuel, medicine and wheat imports amid dwindling foreign currency reserves.
The price of petrol rose by over 10 per cent on Wednesday while wheat prices are expected to follow suit in coming days, Tony Seif, head of the association of bakeries, told The National.
Mr Seif said the increase in bread prices will be determined in co-ordination with the Economy Ministry and millers and will be proportional to the increase in production and distribution costs.
The price rise comes a day after tens of petrol stations, bakeries and supermarkets closed shop as shoppers hoarded food and motorists waited in long queues to fill up their tanks.
The Lebanese pound dropped to a new record low of 15,000 against the dollar on Tuesday, fuelling sporadic protests across the country for the second consecutive week.
The sharp devaluation of the pound prompted many shops to suspend sales.
We eventually decided to close our doors because we were selling at a loss," a supermarket manager told The National.
The manager said outlets are struggling to price their products given the rapid devaluation in the exchange rate. “We’d rather stop selling than having to replenish our stock at a loss,” he said.
Elias Abla, the owner of a small bakery, said the sharp devaluation was forcing him to raise prices to cover the rise in the cost of ingredients that go into the production of a variety of pastries and wheat-based goods.
"It is not only about the cost of wheat," he said. "Even with the price hike, I'm struggling to cover my costs."
The list of businesses struggling to keep pace with the fluctuating exchange rate is expanding with several pharmacies planning a strike on Thursday to protest against supply shortages and operational losses.
Pharmacist Rana Wakim said the drop in the national currency was translating into losses for pharmacies struggling to cover rising rental payouts and daily operational expenses.
Another challenge is the fast-changing prices of non-subsidised medicines, Mrs Wakim said, echoing complaints by business owners finding it difficult to price imported goods.
Pharmacies are also having difficulty replenishing their stock of subsidised medicines as suppliers struggle to secure the necessary dollars to finance imports.
Caretaker Finance Minister Ghazi Wazni told Bloomberg on Tuesday that Lebanon “can no longer continue with the same pace of subsidies,” but didn’t provide details on when the government planned to reduce them.
Caretaker Prime Minister Hassan Diab, on the other hand, told Reuters most subsidies would last until June.
Mr Diab and his Cabinet have yet to agree on a final plan to ration subsidies that are costing the Central Bank an estimated $500 million every month.
The Central Bank, which has been subsidising vital imports of fuel, wheat and medicine at the official rate of 1,507 Lebanese pounds to the dollar, has $16 billion left in foreign currency reserves, Mr Wazni said on Tuesday.
Central Bank governor Riad Salameh said late last year that his institution could only afford to maintain subsidies for a few months. Mr Salameh discussed on Wednesday the latest developments with Prime Minister-designate Saad Hariri.
Mr Hariri has struggled to form a Cabinet seven months after a massive explosion at Beirut port toppled his predecessor. Mr Hariri and his political rivals, including President Michel Aoun, have been sparring over the makeup of the next Cabinet and reform agenda.
In a short speech on Wednesday evening, Mr Aoun invited Mr Hariri to his palace outside Beirut to immediately form a government. Failing this, Mr Hariri should step down, said the president.
“In the event that the Prime Minister Designate Saad Hariri finds himself unable to form and preside a national salvation government that addresses the dangerous situation that the country and its people are suffering from, then he must give way to anyone who is able to form [a government]” said Mr Aoun.
The international community has urged the country’s political leaders to swiftly form a government that undertakes structural reforms in exchange for financial aid.
The delay in the implementation of a reform programme has deepened the country's economic and financial woes with the national currency losing more than 90 per cent of its value on the black market since the crisis unfolded in late 2019.