Significant fluctuation in dollar exchange rate halts pricing in dollars at supermarkets

Lebanon Economy
2023-02-07 | 02:24
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Significant fluctuation in dollar exchange rate halts pricing in dollars at supermarkets
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Significant fluctuation in dollar exchange rate halts pricing in dollars at supermarkets

Although many stores and supermarkets began charging in dollars yesterday, others did not follow suit.

Instead, after the General Labor Union protested it, the Ministry of Economy delayed this procedure. 
 
Supermarkets and mini-markets are waiting for Caretaker Economy Minister Amin Salam's press conference to determine how pricing will be handled. Still, this method won't be used today before creating an index for consumer protection to prevent pricing chaos, as confirmed by follow-up sources.
 
Nabil Fahed, Head of the Syndicate of Supermarket Owners, said to Nidaa al-Watan that pricing in dollars would take some time because institutions need time to program their systems.
 
He emphasized that not all commodities would be priced in dollars because some, like vegetables, fruits, bread, and tobacco (from the Regie), had been kept in Lebanese lira by their producers. Additionally, some goods produced locally will continue to be priced in the local currency.
 
The commodities that importers give to them in dollars would unavoidably be priced in dollars, he added.
 
Supermarkets and food stores are awaiting the details of the decision that will be made by the Minister of Economy to modify their computer systems in dollars. This process takes time, so they must first complete the necessary preparations.
 
About the mechanism for determining the exchange rate, Fahd stated, as it became known, that "the price that will be announced at the entrance to the store and cashiers would be implemented so that it would clear to consumers." 
 
Five benefits of such a move
 
Fahed listed the following advantages:
 
1 - Goods shall be transparently priced at retail locations to represent their actual cost.
 
2 - Pricing in a stable currency (in dollars) is advantageous to consumers first and to the economy and business sectors second.
 
3. Pricing in dollars would encourage competition among supermarkets so customers can compare the announced pricing in a stable currency and visit the retailer offering the best deal.
 
4 - There's a chance that prices will go down by a certain amount since suppliers won't have to raise their prices in response to changes in the dollar's exchange rate on the black market.
 
5 - The situation for consumers will only change for the better. Payment will be made in Lebanese lira, just as it is today; the only difference is that the price of the goods will now be displayed on the shelves in dollars rather than lira, and the selling process will remain the same.
 
What are the negative sides of such a move?
 
The expansion of dollarization to include food commodities is one of the drawbacks, as noted by a delegation from the General Labor Union led by Bechara al-Asmar, who spoke with Salam about the implications of overnight dollar pricing in supermarkets. 
 
As a result, the dollarization step was delayed until some procedures were finished, which both teams agree are necessary before taking such a step.
 
After their discussion, Salam stated that the Ministry had "been slow in taking decisions that affect consumers. Therefore we provided a week to see the reaction of citizens and the labor union."
 
Reasons for reversing the decision:
 
He emphasized that the following are the reasons for reversing the decision:
 
- The absence of elements that would allow the monetary authorities to unify the exchange rate and provide stability against the devaluation of the national currency.
 
- The exchange rate is open to the unknown, which could go above 75,000 LBP. We intended to develop an index for consumer protection because the future of this issue is still unclear.
 
Trade undercover in Lebanese lira
 
"The food trade was camouflaged in the Lebanese currency; everyone imports, pays in dollars, and prices everything in dollars," he added. 
 
"We examined these issues with the Parliamentary Economic Committee and various economists," he stressed.
 
"We are convinced that a solution must be found, even if it is extraordinary, and this decision is subject to modification, cancellation, or alteration when we achieve stability in the dollar exchange rate," he stated.
 
Given the unusual variations in the exchange rate for the dollar, he continued, "We agreed to provide a brief period for deliberation on the topic to protect customers."
 
Al-Asmar believed that "the index Salam proposed is vital, but we want it to be in the Ministry of Economy's hands and in our national currency, and for the Ministry to undertake the monitoring. 
 
"Using this reasoning as a foundation, we look forward to working together on the index and not leaving the citizen at the whim of supermarket owners and big retailers," he added.
 
"Merchants receive the Value-added tax (VAT) according to the exchange rate of 60,000 LBP and declare it to the Finance Ministry at a value of 15,000 LBP," he continued. 
 
"This issue needs to be resolved by the Ministry of Finance in coordination with the Ministry of Economy," al-Asmar added.
 
He concluded by clarifying that "once we talked about the dollarization of basic commodities, it implies that we are talking about the dollarization of gasoline and all other commodities, all of this, and the salaries of the public sector are still at the price of 1,500 LBP."
 
 
 

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