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Choosing Food or Fuel: Lebanese Scrape by in Inflation Nation

“We are cutting short on basics like meat and milk,” Roudy Hanna, a Lebanese resident of Beirut in his early 20s, told The Media Line. “Most medicines aren’t available anyway and you have to cut your grocery budget to buy the fuel needed to get to work.”

Hyperinflation is accelerating as Lebanon dives ever deeper into its economic crisis, exacerbated by the COVID-19 pandemic.

“The abyss that we have fallen into is the culmination of years of overspending on non-revenue generating projects, corruption and a total lack of planning,” Moustafa Assad, a Lebanese freelance researcher on banknote issuances, told The Media Line.

According to a recent report by the American University of Beirut’s Crisis Observatory, a family of five needs to spend at least 3.5 million Lebanese liras (approximately $2,300) on groceries each month, or more than five times the minimum wage of 675,000 liras (about $440), at the official exchange rate.

The free market rate, however, is something else. When Prime Minister-designate Saad Hariri on July 15 gave up on forming a government, the lira fell to 22,000 against the dollar on the black market. That meant the minimum wage dropped to the equivalent of $29 per month, the world’s lowest.

This comes as the government has slowly started to cut subsidies of basic goods from their current level of approximately $5 billion annually. It can no longer afford to spend just over 70% of its budget to help citizens buy the necessities of life, subsidies that ¾ of the population need to survive.

“We are seeing just the beginning of the inflation and we are surviving on the bare minimum of government spending,” Assad said. “Feeding the masses should be the only plan for any government these days. …

“The government’s actions tomorrow must focus only on sustaining the needy on the one hand, and on the other, to gather its strength and start to come up with plans that would put the brakes on the crumbling economy and try to maintain some form of stability in the markets,” he added.

“Sadly, it seems that we are learning to adapt; it’s what we’re good at,” Hanna said. “Young people are either looking to emigrate or to find remote jobs that pay in US dollars, even if the salary is $300.”

But the country also faces a shortage of American currency.

“Today, a normal [monthly] salary for an average employee in Lebanese pounds is actually worth nothing and is enough for less than a week’s worth of necessities,” Assad said.

The economic crisis will only worsen, he added.

“Today we stand at a cliff with zero money left and nothing in return. The prices will rise as we are witnessing now and peoples’ suffering will deepen,” he said. “Once the last penny is spent we will start seeing a catastrophe of a sizable magnitude.

“We may even get to a point where finding necessities will become a challenge,” Assad continued. “Next winter will be catastrophic and nobody is preparing for the cold, the food or other provisions.”

Mokhtar, a Lebanese activist who declined to give his last name, agrees with the grim forecast for Lebanon’s economy.

“It will get worse as the current political class has no plan other than kicking the can down the road. … They are wasting precious time awaiting a geopolitical deal that keeps them afloat,” he told The Media Line, referring to the deadlock over forming a government.

However, Mokhtar believes the price of food is less problematic than the cost of other staples.

“What worries me are the fuel shortages: gasoline for cars and diesel for generators, as well as an increase in the price of internet,” he said. “This will have a much greater impact than food prices.”

Bachar EL Halabi, Middle East and North Africa geopolitical analyst at ClipperData, NYC and a Lebanese political activist, says the government is borrowing close to $250 million from the World Bank to provide direct financial assistance to nearly 790,000 of the country’s poorest citizens over the course of 36 months.

This represents a modified form of the subsidy system for the purpose of securing electoral support, he argued.

“In essence, this is a new way of buying loyalties to ensure reelection in next year’s upcoming parliamentary elections,” EL Halabi told The Media Line. “Our blanket subsidy regime, which has been in place for decades, was a way to buy loyalties to remain in power and further enrich the rich.

“These allies of the sectarian warlords allowed the ruling sectarian elite to perpetuate its Ponzi scheme at the expense of the populous,” he added.

EL Halabi said the unaffordability of food could worsen Lebanon’s security situation, especially in the long term.

“More food insecurity means more instability … nowadays we see citizens taking things into their own hands by, for instance, stopping and hijacking trucks carrying what are possibly smuggled and subsidized products to Syria,” he said.

“However, the sectarian ruling elite continues to be the only side that retains and is able to exercise violence, whether through the official state security and military institutions or their sectarian militias, which means they will be able to control any flare-ups in the streets in the short to medium term,” EL Halabi said.