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Mon, 20 Jan 2020 11:21 GMT

Lebanese Purchasing Power Hits Rock Bottom as Unprecedented Price Hikes Soar

Business

7Dnews London - Inas Sherry

Thu, 12 Dec 2019 09:02 GMT

While waiting for the new government to take effect and assume an agenda, that is capable of handling and managing the economic crisis, markets and shops have started to become a death sentence imposed on every Lebanese person. They find themselves caught in an everlasting wave of inflation, sending prices for food supplies and other basic products to the roof, in a very short time and at an unprecedented rate.

Prices are Insanely Increasing 

“We apologise for the unavailability of some products, we do not wish to raise prices,” is a statement you can read almost everywhere and is widely used by shop-keepers (big or small) who sell food supplies among other basic commodities. 

“Cigarettes were the first products we stopped selling,” one canteen owner near Al Gmeza province said, in his interview with 7Dnews. He continued, “We do not want to argue with customers. Dealers impose on us the exchange rate used in the black market when providing us with products to sell, meanwhile the customer wants to only pay the old prices as before, but we cannot agree because we do not want to lose money.”

It is not just cigarettes that are not on sale anymore in this store, the owner has told us that once he runs out of the products available in the store, he will start selling only basic products.

What this canteen or small store is experiencing is no different from what other stores are going through. It is the same situation everywhere in the country; an ever-growing dispute between the dealers who provide shops and stores with food supplies to sell, and the store owners who are now trying to focus only on selling the basics.

According to one shoppers’ account of the dire situation, “For breakfast I now tend to choose between either cheese or milk, and I always go for the cheapest. As for lunch, it is an entirely different story and a major problem for me and my family, a meal that used to cost me only 10 thousand Lira (US $6) now costs 20 thousand Lira ( 12 Dollars), and I am not even exaggerating,” she said.

Even Prices for Subsidised Bread is Increasing

According to the ministry of economics, prices have increased by only 11%, however, the rate provided by the ministry is far from the reality. One small stride around the markets in Lebanon shows you that, since the uprising started in October, the exchange rate of the dollar in the black market has increased, pushing up prices of products from 11% to 25% as a minimum; as for the rate on imports, it has skyrocketed to 40%.

Regarding the prices of subsidised bread, it has drastically increased as well, but differently. Instead of selling 1000 gram of bread, it is now decreased to 900 gm, supposedly sold for 1500 Lira (US $1.5) as decreed by the government, however, the bakeries are now selling lesser than the amount provided by the government, instead of increasing the price. Whenever they are asked why, they always resort to the unavailability of enough dollars to import wheat.

The problem of rising prices is fundamentally due to the substantial difference between the dollars’ exchange rate in the bank and the one used in the black market. In his interview with 7Dnews, chairman of the syndicate for imports, Hano Bahsli explained, “There is 40% difference between the exchange rate provided by the bank for the dollar and that provided by the black market, which means that one dollar would sell for 1500 lira at the bank as opposed to 2200 lira in the black market, but no products have matched the increase, either way.”

He then explains that what has happened is not an actual increase in the price of food supplies. “The importers are now selling products to local markets in dollars at the same price, however, they tend to increase prices if sold in liras. The importer cannot find the dollar under its actual exchange rate, so they resort to the black market, and to keep their capital flowing and maintain profit, they either get their money in dollars or in liras but according to the rate provided by the black market.”

He added that the bigger problem is that “most of our products and food supplies are imported from abroad. And, therefore, the problem that has arisen and has deeply hit the food supplies market is predominantly attached to the dollars’ exchange rate. Even in terms of locally manufactured products, their prices would increase if the initial substance used in its manufacture is arriving from abroad.”

Rising Prices Accompanies Low Income

Increased prices are not the only reason why purchasing power is hit to the core, there is another rationale that carries the same significance, and it is the substantial fall that income has been suffering; the fact that it has nosedived by 50% in most cases, and some company owners have diverted their policies towards cutting 50% from salaries which has further deepened the crisis.

If we add a 50% decrease in wages to the upsurge of commodity prices, we can easily detect that the purchasing power of the Lebanese has plunged by 70%.

According to information provided by a survey conducted by Info Pro Research, the private sector has continued to suffer a substantial loss since the start of the October 17th unrest, which has overwhelmingly led to a loss of 160,000 jobs, either temporarily or permanently.

The survey has also revealed that at least 10% of companies operating from inside Lebanon have closed their doors or ceased operations completely.

This survey was done during the last week of November this year, and it has included the views of around 300 companies who represent the private sector in Lebanon, chosen according to their location, size of business and the sector they belonged to.

In the same context, Kamil Abo Suliman, Minister of Labour, has confirmed that around 70 companies have dismissed all their workforce.

Translated by Nariman Mohammed

Middle East