In just three months, the customs dollar in Lebanon recorded three increases, which will further impoverish the Lebanese and plunge them into a spiral of inflation, with an average price increase of about 10 to 15% likely.
This article was originally published in and translated from Lebanese newspaper Nidaa al-Watan.
The political system, through the government of PM Najib Mikati and Banque du Liban, is keen to take patchwork decisions that do not fatten the public treasury and do not satisfy the "hunger" of public sector employees to finance the supposed increases in their salaries, which is the pretext raised by the stakeholders to justify this increase in customs.
The first amendment to the customs dollar took place in February when it was raised ten times from LBP 1,500 to LBP 15,000, then it was raised again to LBP 45,000 suddenly on February 28, and those concerned at the time (PM Mikati and Minister of Finance Youssef Khalil) argued that the goal is to increase state revenues in light of the financial and economic crisis.
Banque du Liban also issued a new circular to raise the customs dollar from LBP 45,000 to LBP 60,000 from April 18 until April 30. The Central Bank also issued a list of the monthly averages of foreign currency prices, which must be approved in the customs dollar, except for new and used imported cars.
According to Nidaa al-Watan, experts believe that randomly determining the exchange rate of the customs dollar without any economic strategy and in light of the significant losses in the financial system, which have not been addressed for three years, and the accompanying high inflation, will fuel a continuous and accelerating rise in the exchange rate of the US dollar in the black market.
In other words, it will only be one of the catalysts for the vicious circle in which we have been revolving since the beginning of the crisis, that is, the continued collapse of the exchange rate of the Lebanese lira against the dollar and a steady increase in inflation rates.
Muhammad Shams al-Din, a researcher at Information International regional research & consultancy firm, explains to Nidaa al-Watan that raising the customs dollar to LBP 60,000 will not achieve any economic goal but instead will lead to an increase in smuggling, a decline in imports, and more economic paralysis and will not increase state revenues.
Between the decline in state revenues and smuggling, the result will be the collection of the same revenues that were recorded before the customs dollar was raised, and this matter is known historically.
Shams El-Din also pointed out that "raising customs duties on cars will lead to a decline in imports and eliminate this market, and this is what the beneficiaries do not want."
Regarding if there is going to be a new raise next month, economist Basem Al-Bawab confirmed to "Nidaa Al-Watan" that the decision will constitute a problem for the economic situation regarding increasing inflation.
"It is true that it will not include cars, but there are imported foodstuffs, car parts, furniture, and electronics, all of which will increase their prices [...], and in my opinion, this decision is a prelude to the price of the customs dollar according to the Sayrafa platform soon."
He added that "we are facing a new wave of inflation that may reach a minimum of between 10 and 15 percent, that is, a further decline in the purchasing power of the citizen, a greater economic contraction, and a higher poverty rate."
He stressed that these decisions indicate that those who take them are as if they are living on another planet as if they are imposing taxes in an economically healthy country and not in a country in a deep financial and monetary crisis, and this is unacceptable because it aims to finance public sector salaries, without any real productivity and in light of ongoing strikes.