Lebanon’s inflation soared by 264 percent in March, while food and beverage inflation rose by 350 percent annually following the first official devaluation in February.
Inflation is expected to continue to rise further in 2023, further deepening Lebanon’s cost of living crisis and increasing pressure on the government to pass economic reforms that could help Lebanon access much-needed loans.
Lebanon has been in a presidential vacuum since the first of November after the various parties failed to elect a president. This means that the government that exists today is a caretaker government that cannot pass fundamental reforms before electing a president and forming a new government.
In February, Lebanon adopted a new official exchange rate for the currency, which devaluated the Lebanese pound by about 90 percent. This was a step towards the single exchange rate urged by the International Monetary Fund.
However, there is still a significant difference between the official rate (15,000 Lebanese pounds per dollar) and the black market rate (about 100,000 Lebanese pounds per dollar).
IMF Near East and Central Asia Director Jihad Azour recently stressed that “the IMF is committed to Lebanon and has always been in contact with the authorities to help the country get out of the crisis it is experiencing.”
He said that the Fund is aware of the difficult conditions experienced by the Lebanese citizen and the significant decline in confidence, adding, “For this reason, the Fund has stressed on many occasions the importance of supporting Lebanon to get out of its crisis, and on this basis, consultations took place and a preliminary agreement was reached in April 2022 to help Lebanon get out of one of the most difficult economic crises it is experiencing, which today has turned into a humanitarian and social crisis.”
He said that the Fund is aware of the difficult conditions experienced by the Lebanese citizen and the significant decline in confidence, adding, “For this reason, the Fund has stressed on many occasions the importance of supporting Lebanon to get out of its crisis, and on this basis, consultations took place and a preliminary agreement was reached in April 2022 to help Lebanon get out of one of the most difficult economic crises it is experiencing, which today has turned into a humanitarian and social crisis.”
Read: IMF: Lebanon in a very dangerous situation
He referred to the IMF team that recently visited Lebanon as part of the Article IV consultations, which stressed the need for taking integrated action to address the financial crisis in the country and its impact on the economy, for restoring confidence and building an economy that addresses distortions and repercussions on the most vulnerable social segments, as well as restructuring some public institutions to relaunch growth and enhance economic movement.
He added that achieving those goals requires addressing some of the problems that have accumulated at the financial level, stressing the need to fully address these crises to enable Lebanon to get out of its plight.
The IMF has provided technical support to Lebanon in addition to signing a preliminary program, he said, noting that missions are currently being sent to Lebanon in cooperation with the authorities to work on developing frameworks and reforms for the next phase in terms of public finance, monetary and financial debt management and restructuring the economy.
In April last year, Lebanon reached a staff-level agreement with the IMF in the hope of receiving $3 billion in exchange for passing and implementing a basket of fundamental reforms that remain pending.
The World Bank has described Lebanon’s financial crisis as one of the worst in the world since the mid-nineteenth century, pushing three-quarters of the country’s population to the brink of poverty, while a combination of triple-digit inflation and a collapsing currency wiped out people’s savings.
Useless salary increase
It seems that the decision of the Council of Ministers in Lebanon on April 18, which granted employees four times their salaries starting at the end of May for a period of two months, with the decision to be re-evaluated later, did not seem to have taken effect.
The struggle between public sector employees and the government continues, as public sector employees reject this increase and have announced that they will continue to strike.
As for the educational sector, it also needs clarifications from the government to announce its final position on salary increases.
Thus, all institutions in Lebanon are paralyzed until further notice, while citizens are groaning from the unbelievable rise of the dollar against the pound in the almost total absence of basic services they need.
For more on Lebanon, click here.
