Lebanon economic deterioration accelerates as fuel subsidy ends

Lebanon economic deterioration accelerates as fuel subsidy ends
Prime Minister Hassan Diab quit last August after a catastrophic blast that destroyed much of the Port of Beirut, killing 218, injuring 7,500 and leaving 300,000 people homeless. (Reuters)
Short Url
Updated 14 August 2021

Lebanon economic deterioration accelerates as fuel subsidy ends

Lebanon economic deterioration accelerates as fuel subsidy ends
  • End of fuel subsidies seen raising cost of other goods
  • Central bank governor says no one is running the country

RIYADH: Lebanon’s economic decline is set to gather pace after the central bank said this week it will end a fuel subsidy that has drained its reserves, a move that is likely to affect everything from food to clothes and basic goods.

“The price of fuel affects the price of all commodities in Lebanon,” Lebanese economic analyst Bassel Al-Khatib told Arab News. “Transportation and food will become significantly more expensive, and gasoline, diesel and cooking gas prices will at least triple if not more, paralyzing the country as all sectors will be affected.”

Lebanese economic crisis will rank as among the top three in the world in the past 150 years, according to the latest World Bank Lebanon Economic Monitor (LEM).

The country is already suffering from shortages of food, medicines, and other basic items, as well as power supply shortage due to lack in diesel supply. Stocks of liquefied petroleum gas, usually sold in canisters and used widely in homes and businesses, are also running out.

Lebanese lined up in long queues on Tuesday to stock up on cooking gas following warnings of imminent shortages, as the economic crisis eats away at supplies of basic imports.

“Our current stock will last one week, after which, if no solution is found, gas used in homes will be sold on the black market, ” Farid Zeynoun, the head of a syndicate of petroleum gas distributors, told France 24.

Zeynoun blamed the crisis on a delay by Banque Du Liban, Lebanon’s central bank, in opening credit lines to fund imports.

Central bank Governor Riad Salameh defended his actions in an interview broadcast on Radio Free Lebanon on Saturday, saying the government could resolve the problem by passing necessary legislation.

“So far you have nobody running the country,” he said. The Lebanese pound is “hostage to the formation of a new government and reforms,” he said.

Lebanon’s politicians have failed to agree on a new government since Prime Minister Hassan Diab quit last August after a catastrophic blast that destroyed much of the Port of Beirut, killing 218, injuring 7,500 and leaving 300,000 people homeless. He has continued in a caretaker capacity since then.

The central bank has said it cannot use mandatory foreign currency reserves, currently $14 billion, without legislation.

Salameh said that more than $800 million spent on fuel imports in the last month should have lasted three months, blaming traders and saying it was “unreasonable” that so much had been spent with no product available in the market.

With the Lebanese pound having lost 90 percent of its value in less than two years, the central bank is in a bind. Spend its reserves and the currency will likely depreciate further, spurring more inflation for the long-suffering Lebanese population; hold onto them and inflict prices rises through higher fuel prices.

Critics of the fuel subsidy scheme also say it has created huge incentives for smuggling and hoarding by selling petroleum products at a fraction of their real price.

The decline in the pound has already eroded Lebanese purchasing power. The minimum wage was equal to about $450 before October 2019, and is now worth $30, equal to about two tanks of gasoline.

In June, the Lebanese parliament approved a distribution of $556 million through ration cards that will support 500,000 of the country’s poorest families with an average of $93 per month for one year. Some are calling for an increase in those payments to counter increased fuel costs.

“It would have been better to approve citizen’s support through the cash card, adding to it two gasoline tanks for example, to enable them to move around, instead of subsidizing,” said Al-Khatib.

Such moves constitute a band aid for the Lebanese economy that can only begin to recover if a government can be formed and help can be obtained from the International Monetary Fund.

Over half of Lebanese people now live in poverty, one in three Lebanese suffer from food insecurity and nearly 4 million people are at risk of not accessing safe water, according to the UN.

“We only have one of two solutions, approving the financing card or accelerating the government formation which will limit the collapse through a rescue plan, and by reviving negotiations with the (IMF),” said Al-Khatib.


NEOM awards London-based Keller major piling contract for ‘The Line’

NEOM awards London-based Keller major piling contract for ‘The Line’
Updated 12 sec ago

NEOM awards London-based Keller major piling contract for ‘The Line’

NEOM awards London-based Keller major piling contract for ‘The Line’

RIYADH: Saudi Arabia’s $500-billion project NEOM has awarded UK’s Keller a major piling contract for “The Line,” a 170-km megacity being developed within the Kingdom’s flagship project. 

Starting in the west at the Gulf of Aqaba and terminating at the NEOM International Airport within the upper valley region, The Line is subdivided into around 135 modules, according to a statement. 

Each module contains eight buildings founded on large diameter bored piles. 

Keller had signed an umbrella framework agreement with respect to the project, and is mobilizing for an anticipated first works order on a portion of Module 40 which has an expected value to Keller of around £50 million ($61.5 million), with the work anticipated to be completed within the next 12 months.

Listed on the London Stock Exchange, Keller is an independent geotechnical solutions specialist.


NEOM, McLaren Racing partner to drive innovation in electric motorsport

NEOM, McLaren Racing partner to drive innovation in electric motorsport
Updated 27 June 2022

NEOM, McLaren Racing partner to drive innovation in electric motorsport

NEOM, McLaren Racing partner to drive innovation in electric motorsport

RIYADH: NEOM, one of Saudi Arabia’s flagship projects, has partnered with McLaren Racing to drive innovation and talent development in electric motorsport, according to a statement. 

With the partnership, NEOM becomes the title partner of the McLaren Formula E and Extreme E racing teams, which brings the two electric race series together under the banner of NEOM McLaren Electric Racing.

“Our partnership with McLaren Racing complements NEOM’s commitment to driving sustainable solutions and tackling some of society's most pressing challenges,” CEO Nadhmi Al-Nasr said. 

“The partnership will allow us to share our collective resources and experience to yield exciting results, not only for our own organizations, but also for the broader automotive and sports industries,” he added. 

McLaren will be located within OXAGON’s Research and Innovation Campus, which will provide cutting edge facilities and collaboration spaces. 

During 2023, McLaren and NEOM will create a bespoke program to nurture engineers and students, in line with the mega project’s commitment to develop Saudi talent. 


Thailand to seek fertilizer supply from Saudi producers

Thailand to seek fertilizer supply from Saudi producers
Updated 27 June 2022

Thailand to seek fertilizer supply from Saudi producers

Thailand to seek fertilizer supply from Saudi producers

RIYADH: Thailand is planning to negotiate with Saudi Arabia for the supply of fertilizers as the country is currently facing a shortage, especially due to the high cost of imports.

The Thai Chamber of Commerce will coordinate with Saudi suppliers and a business event is to be held between three major Saudi-based fertilizer suppliers and Thai importers on June 29, Thai local media reported citing Commerce Minister Jurin Laksanawisit.

Laksanawisit added that two Saudi suppliers were recently provided permission to sell fertilizers to Thailand.

Thailand heavily relies on imports for its fertilizers, with only 8 percent coming from domestic sources and a usage of about 5 million tons of fertilizer a year, according to the minister.

The country’s overall demand for fertilizer from Saudi Arabia is about 808,000 tons, the media report noted citing industry statistics.


US stocks — Wall Street sheds opening gains on losses in high-growth stocks

US stocks — Wall Street sheds opening gains on losses in high-growth stocks
Updated 27 June 2022

US stocks — Wall Street sheds opening gains on losses in high-growth stocks

US stocks — Wall Street sheds opening gains on losses in high-growth stocks
  • S&P 500 energy stocks among few gainers
  • Robinhood rises on Goldman Sachs upgrade
  • Indexes down: Dow 0.24 percent, S&P 0.36 percent, Nasdaq 0.68 percent

REUTERS: Wall Street’s main indexes fell after opening higher on Monday, as a rally last week on easing concerns over inflation lost steam, with high-growth stocks leading declines.

“We had a nice rally last week, so I think we’re seeing a little bit of profit taking this morning,” said Dennis Dick, a proprietary trader at Bright Trading LLC in Las Vegas.

“The stocks that were up the most last week are the ones getting hit the hardest here today.”

The tech-heavy Nasdaq Composite index, which gained 7.5 percent last week, fell 0.7 percent to lead declines among the three major indexes.

Investors were betting on the retreat in oil prices from the three-month highs hit in June to potentially ease inflationary pressures and likely push the Federal Reserve to moderate its aggressive policy tightening.

However, data on Monday showed new orders for US-made capital goods and shipments increased solidly in May, pointing to sustained strength in business spending on equipment in the second quarter.

Oil prices also moved back into positive territory, pushing up the S&P 500 energy index by 2.2 percent, reining in expectations for inflation falling on the back of lower energy prices.

The US central bank has rapidly raised interest rates to tame 40-year-high inflation, stoking fears its actions could tip the world’s largest economy into a recession.

After the benchmark S&P 500 index earlier this month recorded a 20 percent drop from its January closing peak to confirm a bear market, investors have been trying to gauge when the market might hit its bottom.

At 10:11 a.m. ET the Dow Jones Industrial Average was down 76.62 points, or 0.24 percent, at 31,424.06, the S&P 500 was down 13.94 points, or 0.36 percent, at 3,897.80 and the Nasdaq Composite was down 78.44 points, or 0.68 percent, at 11,529.19.

Shares of Robinhood Markets rose 0.6 percent after media reports said Goldman Sachs upgraded the retail broker’s stock to “neutral” from “sell.”

Goldman Sachs, however, cut rating on Coinbase Global Inc. to “sell” from “buy,” according to media reports, sending shares of the cryptocurrency exchange lower by 9.4 percent.

Declining issues outnumbered advancers for a 1.03-to-1 ratio on the NYSE and a 1.31-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 29 new lows, while the Nasdaq recorded 16 new highs and 41 new lows.


OPEC+ trims 2022 market surplus projection to 1m bpd -report

OPEC+ trims 2022 market surplus projection to 1m bpd -report
Updated 27 June 2022

OPEC+ trims 2022 market surplus projection to 1m bpd -report

OPEC+ trims 2022 market surplus projection to 1m bpd -report

LONDON: The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, trimmed its projected 2022 oil market surplus to 1 million barrels per day, down from 1.4 million bpd previously, a report seen by Reuters showed.

The report was prepared ahead of a meeting of the OPEC+ Joint Technical Committee scheduled to take place on Tuesday.