Lebanon raises gasoline prices further, effectively reducing subsidy

Lebanon's energy ministry further raised gasoline prices on Friday, effectively narrowing its fuel subsidy.

The price of 95-octane gasoline and 98-octane gasoline were raised by more than 37%.

The increase in gasoline prices is to be implemented immediately, an official document showed.

Worsening gasoline shortages across Lebanon have led to hours-long queues to get barely any fuel, with violence sometimes erupting at gas stations.

Iran-backed Hezbollah began bringing Iranian fuel into the country via Syria on Thursday, a move the Muslim group says should ease the crippling energy crisis but which opponents say risks provoking US sanctions.

Lebanon last raised gasoline prices on Aug. 22, with the central bank all but running out of foreign reserves to fund the fuel subsidy programme.

The price increase does not fully lift the gasoline subsidy, a step expected to take place soon.

"This is the stage before last of lifting the subsidy," Georges Braks, a member of the Petrol Station Owners' syndicate said. "The subsidy on fuel I imagine from now till the end of the month will go to the last stage and be lifted completely and all of fuel will then be non-subsidised."

The increase in prices will add burdens on a population already reeling from the effects of an economic meltdown dubbed one of the worst depressions of modern history.

The United Nations Economic and Social Commission for West Asia (ESCWA) estimates the crisis has so far propelled 78% of the population into poverty.

Lebanon has been winding down a sprawling subsidy programme for the import of basic needs including fuel, medicine and food.

Critics have said the $6 billion programmes introduced last year was ill-managed and wasteful.

The government announced earlier this month a cash subsidy card system for more than 500,000 families as it winds in-kind subsidies down. 

Lebanon funds its subsidy programme through its foreign currency reserves, relying on the central bank to make up the difference between what importers are paying at the subsidised rate and the market value of the product. 

Lebanon's Central Bank (BDL) governor Riad Salameh has repeatedly warned that subsidies would once end foreign exchange reserves reached their obligatory levels, which he put at $17.5 billion. Under public pressure, Salameh has allowed foreign assets to drop far below the obligatory threshold to allow a few subsidies to remain - though those too are steadily being lifted. 

According to BDL's latest balance sheet on 15 September, foreign assets (including exchange) stand at $12.9 billion, a $1.64 billion drop from about two weeks prior. Notably, this is far lower than the obligatory $17.5 billion the BDL is supposed to have in its coffers.