Lebanon leaning to lift wheat subsidies amid severe loaf crisis

Approval of $150 million World Bank wheat supplies loan agreement  
Lebanon leaning to lift wheat subsidies amid severe loaf crisis
People in Lebanon queuing to buy bread

These days, the Lebanese flock to the bakeries to buy bread. Shameful images spread on social media showing people queuing to get one or two bundles of the commodity. Videos circulate to document incidents of fighting between them in various regions of Lebanon, as they race to obtain this vital basic need.

At a time when the country has been witnessing an unprecedented shortage of bread for weeks, the Lebanese Parliament approved yesterday a $150 million loan agreement from the World Bank to implement the emergency response project to secure wheat supplies.

Lebanon, which is already experiencing a very serious complex economic crisis, which led to inflation recording fantastic levels, reaching levels of 210 percent, has been badly damaged as a result of the Russian-Ukrainian war. It imports about 80 percent of its need for wheat from these two countries.

The blockade imposed by the Kremlin on Ukrainian grain exports through the Black Sea led to a sharp rise in the prices of bread worldwide. Analysts hoped that the agreement signed by Russia and Ukraine in Turkey last week with the support of the United Nations to resume the export of grain through a sea lane in the Black Sea would contribute to “lifting the blockade” of grain.

But the Russian attack on the Ukrainian port of Odessa, less than 24 hours after the signing of the agreement, raised questions about the success of implementing the deal, and led to a rise in wheat prices.

The bread crisis that the Lebanese are going through cannot be linked to the current war alone. There were several factors that indicated that Lebanon was on this dangerous path after the dramatic decline in its foreign currency reserves, in light of an arbitrary support policy that burned dollars and caused massive smuggling operations across the border worth billions of dollars. Lebanon supports the purchase of flour to this day, and it seems that canceling the subsidy is only a matter of time, which will automatically lead to a rise in the price of a bundle of bread most likely to double its price.

This was confirmed by the Lebanese Minister of Economy, Amin Salam, who said that “the old support policy adopted by the previous government was incorrect and was carried out in a random manner and in the absence of transparency.

“In the end, subsidies, in the absence of oversight and in light of smuggling and uncontrolled borders, become subject to acts of theft and deplete the reserves of the Banque du Liban.”

He pointed out that a new policy pursued by the ministry “will lead to the gradual lifting of subsidies on bread, provided that this is accompanied by direct support for the poorest classes through financing credit that enable them to benefit from special subsidies.

According to Salam, “75 percent of those queuing are displaced Syrians, while 400,000 bundles of bread go daily to these displaced people, who benefit from $7 million in monthly support from the mandatory reserve for bread.”

Previously, Lebanon annually subsidized 600,000 tons of flour, with an amount ranging between 20 and 22 million dollars per month. But this amount decreased to about $17 million after the Ministry of Economy limited the subsidy for the bread industry to flour.



Commercial objectives also contribute to the aggravation of the loaf crisis in Lebanon. Some traders sell subsidized flour (according to the official exchange rate of 1,500 liras) at parallel market prices (which today are around 30,000 liras for one dollar), which brings them huge profits.

In addition to the causes of suffering, an important basic factor is also the lack of sufficient storage facilities to store this substance. Lebanon was aware of this before the Russian-Ukrainian war, following the collapse of the silos in the port of Beirut after the explosion of August 4, 2020.

The Cabinet decided to demolish these, an act that sparked a wave of widespread anger.

The Lebanese government, currently a caretaker government, is looking for sources to buy wheat, including talking directly to the Russians. Meanwhile, Ukraine’s ambassador to Lebanon, Ihor Ostash, told Foreign Minister Abdullah Bou Habib that his country had established a port to ensure the continued delivery of wheat to Lebanon.

Staff strike


The public sector employees’ strike will also delay the distribution of wheat quantities that Lebanon would receive. A few days ago, Salam announced that quantities of wheat would enter within 10 days and would suffice for a month and a half, with a volume of up to 50,000 tons, to be subjected to laboratory tests in the Ministry of Agriculture, after which a committee run by the Ministry of Economy would organize the arrival of wheat to the port and then to the mills, and using monitoring devices that track the arrival of wheat to the kilns.

The first ship loaded with wheat has already arrived in Lebanon, and another ship will arrive in the coming days. However, with the general administration staff continuing to strike, particularly laboratory staff in the Ministry of Agriculture, it is not possible to conduct laboratory tests on samples taken from these ships, which inevitably delays the process of unloading and distributing them.

World bank loan


The aim of the loan, which was approved by parliament, is “to ensure the availability of wheat in Lebanon, in response to the turmoil in the global commodity market, and to maintain affordable access to bread for poor and vulnerable families,” according to the Bank’s description.

After the approval, Salam stated that the money would secure wheat for more than 6 months, if prices continued to decline, reiterating that “most of the locally produced bread goes to non-Lebanese and everyone knows that.”

He stated that “government and security officials have formed a committee to monitor imports and distribution of wheat.”

The World Bank loan is considered a transitional stage between securing wheat at the price of 1500 pounds and liberalizing its price, thus raising the price of a bundle of bread from 13 thousand pounds currently to up to 40 or 50 thousand pounds after lifting the subsidy.