BEIRUT, Aug.11 (Reuters) – Lebanon’s central bank said on Wednesday evening it would start offering lines of credit for fuel imports based on the market price of the Lebanese pound, ending a subsidy on fuel.
Since the onset of a financial crisis, the central bank has effectively subsidized fuel by using its dollar reserves to finance fuel imports at official exchange rates well below the price at which dollars changed hands in the parallel market.
Lebanon suffers from a crippling fuel shortage due to the financial crisis that has caused the Lebanese pound to fall more than 90% against the dollar in less than two years.
Governor Riad Salameh had said earlier today that the bank could no longer subsidize fuel imports and could no longer open lines of credit to them, a ministerial source and al-Jadeed TV said.
Reuters could not immediately reach Salameh to comment on his remarks at a meeting of the Supreme Defense Council.
The government hiked fuel prices in June after the central bank began providing fuel lines of credit at a rate of 3,900 pounds to the dollar, higher than the official rate of 1,500 pounds but still well under. below the parallel market rate. Read more
Dollars were changing hands at around Â£ 20,000 on the parallel market on Wednesday.
Reporting by Laila Bassam, Nafisa Eltahir and Tom Perry; Editing by Alison Williams, Giles Elgood and David Evans
Our Standards: Thomson Reuters Trust Principles.