Economic crisis, severe shortages make Lebanon ‘unlivable’

Economic crisis, severe shortages make Lebanon ‘unlivable’
People on their scooters and motorcycles wait in queue for gasoline in Beirut. (AP)
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Updated 30 June 2021

Economic crisis, severe shortages make Lebanon ‘unlivable’

Economic crisis, severe shortages make Lebanon ‘unlivable’
  • The Lebanese pound has nose-dived, banks have clamped down on withdrawals and transfers, and hyperinflation has flared.

BEIRUT: Ibrahim Arab waits in line several hours a day in the hot summer sun to buy gas for his taxi.
When he’s not working, the 37-year-old father of two drives from one Beirut pharmacy to another, looking for baby formula for his 7-month-old son — any he can find — even though the infant got severe diarrhea and vomiting from an unfamiliar brand.
He worries what would happen if his children got really sick. Once among the best in the region, Lebanon’s hospitals are struggling amid the country’s economic and financial crisis that has led to daily power outages that last for hours, shortages of diesel fuel for backup generators, and a lack of medical equipment and drugs.
After 20 months of suffering with no end in sight, a new reality is setting in for most of Lebanon’s estimated 6 million people: Days filled with severe shortages — from spare parts for cars to medicine, fuel and other basic goods in the import-dependent country.
“My life was already difficult, and now the gasoline crisis only made things worse,” Arab said on a recent day. To survive, he works a second job at a Beirut grocery store, but his monthly income in Lebanese pounds has lost 95 percent of its purchase power.
The crisis, which began in late 2019, is rooted in decades of corruption and mismanagement by a post-civil war political class that has accumulated debt and done little to encourage local industries, forcing the country to rely on imports for almost everything.
The Lebanese pound has nose-dived, banks have clamped down on withdrawals and transfers, and hyperinflation has flared.
The liquidity crunch is crippling the government’s ability to provide fuel, electricity and basic services. A shortage of dollars is gutting imports of medical supplies and energy.
The fuel shortage has especially raised fears that the country could become paralyzed. Even private generators, used by the Lebanese for decades, have to be switched off for hours to conserve diesel.
“We are really in hell,” tweeted Firas Abiad, director general of Rafik Hariri University Hospital, which leads the country’s coronavirus fight. Despite a heat wave, the hospital decided Monday to turn off the air conditioning, except in medical departments.
Electricity cuts have affected Internet connections in various cities, while bakeries warn they might have to close due to fuel shortages.
The situation has become critical in recent weeks, with scuffles and shootings at gas pumps, including one in the northern city of Tripoli, where the son of one station’s owner was killed.
Many Lebanese decry their leaders’ inability or unwillingness to work together to resolve the crisis.
The country has been without a working government since Prime Minister Hassan Diab’s Cabinet resigned days after the massive explosion at Beirut’s port on Aug. 4, 2020, that killed 211 people and injured more than 6,000. The catastrophic blast was caused by nearly 3,000 tons of highly explosive ammonium nitrate that had been improperly stored there for years.
Residents expect the economy to get even worse, so they look for ways to adapt and cope.
To avoid waiting for hours, some pay people to fill their car for them. Others take their laptops and work from inside their vehicles in the lines that stretch for blocks and are known as “the queues of humiliation.”
Many rely on relatives and friends abroad to send medicine and baby formula. Those who can afford it fly to nearby countries for a day or two to stock up for months.
A man who works in solar energy said business is booming, with people fed up with decades of government promises to fix Lebanon’s power grid.
Last week, Diab approved financing energy imports at a rate higher than the official exchange rate, effectively reducing fuel subsidies amid the worsening shortages. The move that took effect Tuesday is expected to start easing the crisis temporarily, although prices shot up 35 percent.
Some people have been hoarding fuel out of fear that prices will nearly double, and this has added to its scarcity. Such an increase in prices will put the cost of fuel out of reach of many in a country where more than half the population lives in poverty.
Others smuggle it to neighboring Syria, which has its own fuel crisis and where the price of gasoline is five times higher than in Lebanon. But that also adds to the shortage in Lebanon.
The crisis has led angry residents across the country to block roads in protest.
They seized several tanker trucks in northern Lebanon and distributed gasoline for free to passersby. Another group confiscated a truck carrying powdered milk and also distributed its contents.
“Our business has become a job of mass destruction,” said Ahed Makarem, 24, who works at a gas station in the coastal village of Damour, south of Beirut.
As he spoke, a line of hundreds of cars moved slowly along the highway. Dozens of workers activated the station’s 12 pumps to fill vehicles and scooters. Motorists were limited to 20 liters (about 5 1/4 gallons).
Makarem said his 13-hour shift starts at 6 a.m. and he hardly has time to eat or sit. Fistfights have broken out in recent weeks as some people try to cut in line, he said, adding that when the station closes at 7 p.m., police sometimes have to intervene to turn away angry customers who waited in vain.
Many fear things will only get worse in the coming months, with the central bank’s reserves dropping and no solution in sight. Lawmakers are working on a ration card system that would give about 500,000 poor families between $93 and $137 a month. If approved, it would lead to even smaller subsidies and skyrocketing prices.
Arab, the taxi driver, is bracing for when the temporary solutions fall away and the crisis worsens.
He recently had to fix the brakes on his car, and his engine needed a spare part. That cost him more than twice the minimum monthly wage in Lebanon.
“I wish I had the opportunity to leave. This country is unlivable,” Arab said.


China’s central bank rules all crypto transactions are illegal

China’s central bank rules all crypto transactions are illegal
Updated 24 September 2021

China’s central bank rules all crypto transactions are illegal

China’s central bank rules all crypto transactions are illegal
  • The global values of cryptocurrencies including Bitcoin have massively fluctuated over the past year partly due to Chinese regulations
  • Bitcoin, the world’s largest digital currency, and other cryptos cannot be traced by a country’s central bank, making them difficult to regulate

BEIJING: China’s central bank on Friday said all financial transactions involving cryptocurrencies are illegal, sounding the death knell for the digital trade in China after a crackdown on the volatile currencies.
The global values of cryptocurrencies including Bitcoin have massively fluctuated over the past year partly due to Chinese regulations, which have sought to prevent speculation and money laundering.
“Virtual currency-related business activities are illegal financial activities,” the People’s Bank of China (PBOC) said in an online statement Friday, adding that offenders would be “investigated for criminal liability in accordance with the law.”
The notice bans all related financial activities involving cryptocurrencies, such as trading crypto, selling tokens, transactions involving virtual currency derivatives and “illegal fundraising.”
Bitcoin, which had already been falling before the announcement, sank by as much as 8.9 percent to $41,019 in European afternoon trading before recovering slightly later in the day.
The central bank said that in recent years trading of Bitcoin and other virtual currencies had become “widespread, disrupting economic and financial order, giving rise to money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities.”
This was “seriously endangering the safety of people’s assets,” the PBOC said.
While crypto creation and trading have been illegal in China since 2019, further crackdowns this year by Beijing warned banks to halt related transactions and closed much of the country’s vast network of bitcoin miners.
Friday’s statement by the central bank sent the strongest yet signal that China is closed to crypto.
Bitcoin, the world’s largest digital currency, and other cryptos cannot be traced by a country’s central bank, making them difficult to regulate.
Analysts say China fears the proliferation of illicit investments and fundraising from cryptocurrency in the world’s second-biggest economy, which also has strict rules around the outflow of capital.
The crypto crackdown also opens the gates for China to introduce its own digital currency, already in the pipeline, allowing the central government to monitor transactions.
In June, Chinese officials said more than 1,000 people had been arrested for using the profits from crime to buy cryptocurrencies.
Several key Chinese provinces have banned the operation of cryptocurrency mines since the start of this year, with one region accounting for eight percent of the computing power needed to run the global blockchain — a set of online ledgers to record bitcoin transactions.
Bitcoin values tumbled in May on the back of a warning by Beijing to investors against speculative trading in cryptocurrencies.
“China’s ban on all cryptocurrency trading activity will have some short-term impact on currency valuation, but long-term implications are likely to be muted,” said Ganesh Viswanath Natraj, Assistant Professor of Finance at Warwick Business School.
“This ban will result in the migration of crypto investment opportunities to other hubs in Asia, such as Singapore’s launch of the DBS digital currency exchange earlier this month,” he added.


Saudi Arabia insurance reforms will enhance sector — CAIS CEO

Saudi Arabia insurance reforms will enhance sector — CAIS CEO
Updated 24 September 2021

Saudi Arabia insurance reforms will enhance sector — CAIS CEO

Saudi Arabia insurance reforms will enhance sector — CAIS CEO
  • Adoption of IFRS 17 standards will increase investment in the sector

RIYADH: Saudi Arabia may be the first country in the world to witness a merger between three insurance companies following regulatory reforms, according to Sulaiman Binmayouf, CEO at United Co. for Actuarial Services CAIS.

Many of Saudi Arabia’s 29 insurance companies need capital infusions or mergers to meet the requirements of regulators, after they ordered to triple capital to SR300 million from SR100 million, Binmayouf said.

The Kingdom’s insurance companies are only profitable with high premiums, some of which they have to freeze as reserves, meaning they can’t invest the money, he said.

However, he expects the adoption of IFRS 17 standards by the insurance sector in the Kingdom will help solve the problem.

IFRS 17 is an International Financial Reporting Standard that was issued by the International Accounting Standards Board in May 2017.

The financial statements of insurance companies on the Capital Market Authority (CMA) website are not sufficient for taking an investment decision, said Binmayouf.

The standard will provide a more accurate supervision and disclosure process in the development of financial statements, giving investors a clearer idea of whether they want to invest in the company or not, he said.

“Investors should look at the status of insurance companies in terms of the board of directors and committees, and review the strategic plan and financial statements to make the investment decision,” he said.

That will lead to more capital flowing into the insurance sector, while supporting its stability, he said. IFRS 17 will be implemented in stages, as decided by the central bank.


Fed policy tightening not all bad for Gulf economies — Jefferies

Fed policy tightening not all bad for Gulf economies — Jefferies
Updated 24 September 2021

Fed policy tightening not all bad for Gulf economies — Jefferies

Fed policy tightening not all bad for Gulf economies — Jefferies
  • A likely strengthening of the dollar, to which Gulf currencies are pegged, may push down inflation, because it makes imports less expensive

RIYADH: The impending end of super-loose monetary policy from the Federal Reserve will have both positive and negative effects on the economies of the Arabian Gulf, according to Alia Moubayed, a managing director at investment bank Jefferies International.

A likely strengthening of the dollar, to which Gulf currencies are pegged, may push down inflation, because it makes imports less expensive, Moubayed said in an interview with Asharq.

Higher interest rates on dollar-denominated assets tend to lead to outflows from emerging markets, but Moubayed said that the Gulf markets have recently witnessed an influx of foreign capital, especially into stocks, and so should not be affected as badly as many of their EM peers.

Higher interest rates will increase the financing burden on governments with large budget and trade deficits, such as Bahrain, Moubayed said.

However, countries such as Qatar, Saudi Arabia and the UAE will “benefit from shrinking deficits due to the rise in oil prices and the increase in revenues in national currencies,” she said.

The Federal Reserve announced yesterday that it will likely start reducing its asset purchase program soon, and said policy makers are increasingly minded to start raising interest rates in 2022 instead of 2023 as previously envisioned.

If progress toward employment and inflation targets continues, the slowdown in asset purchases may start in November and end in mid-2022, the Fed said.


APICORP sukuk program given expected AA rating by Fitch

APICORP sukuk program given expected AA rating by Fitch
Updated 24 September 2021

APICORP sukuk program given expected AA rating by Fitch

APICORP sukuk program given expected AA rating by Fitch
  • A default in APICORP's sukuk program would be considered a default in the parent, Fitch said

RIYADH: APICORP, the multilateral development bank set up by Arab oil producers, has received a rating of AA(EXP) by Fitch for its sukuk program.

APICORP Sukuk Ltd. (ASL) is incorporated in the Cayman Islands with the sole purpose of issuing Islamic debt. The final rating is contingent on Fitch receiving documents that support information already provided.

ASL is expected to receive the same AA rating as APICORP as a default in the sukuk program would be considered a default in the parent, Fitch said. APICORP’s rating is based on Fitch’s solvency and liquidity assessment and a “medium risk” business environment.

APICORP was established in 1975 by the 10 members of the Organization of Arab Petroleum Exporting Countries (OAPEC) with the aim of developing the Arab world’s energy sector through equity investment, debt financing, financial advisory and energy research services.


UAE allocates $17.6bn to Emirati housing program in Dubai

UAE allocates $17.6bn to Emirati housing program in Dubai
Updated 24 September 2021

UAE allocates $17.6bn to Emirati housing program in Dubai

UAE allocates $17.6bn to Emirati housing program in Dubai
  • Land plots allocated to Emirati housing projects in Dubai increased to 1.7 billion square feet.

RIYADH: Dubai Ruler Sheikh Mohammed bin Rashid Al Maktoum has approved the allocation of 65 billion dirhams ($17.6 billion) to a housing program for Emirati citizens in Dubai, to be spent over the next two decades, according to a statement from the Dubai Media Office.

Sheikh Mohammed, who is also prime minister of the UAE, issued directives to quadruple the number of Emiratis benefiting from the housing program from next year, and to increase the land plots allocated to Emirati housing projects in Dubai to 1.7 billion square feet.

“We are working to develop a comprehensive plan for ensuring our citizens have access to high quality housing over the next 20 years,” said Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, deputy ruler of Dubai. “Dubai’s urban development plans are subject to constant review and our housing policy will continue to evolve according to the requirements of our citizens.”

The Dubai 2040 Urban Master Plan sets out a comprehensive future map for sustainable urban development in the city, and focuses on enhancing people’s happiness and quality of life in line with the UAE’s vision for the next 50 years.