BEIRUT — Inflation soared by more than 100 percent year over year in May for the 11th month straight. But recently reported price increases, though staggering, are only a taste of the skyrocketing costs Lebanese are set to face as an end to subsidies on essential goods looms but officials continue to slow-walk an alternative strategy.
The consumer price index for May, published on Tuesday by the Central Administration of Statistics, was 119.83 percent higher in May 2021 year over year. The index is used to measure inflation by recording the change in prices of a basket of goods and services over a period of time.
By comparison, inflation was 56.5 percent from May 2019 to May 2020, and just 3.5 percent in the 12 months before that.
The recent increases owe to the fact that the lira’s value against the US dollar has plummeted amid a foreign currency liquidity crunch, even as Lebanon depends on dollars to fund its import-based economy. The national currency plunged from an average of LL4,100 to the dollar in May 2020 to about LL12,800 in May 2021 — a 68 percent loss in value over the course of the year.
According to the CAS’s data, food and nonalcoholic beverage prices soared by 226 percent year over year in May, while furnishings, household equipment and routine household maintenance expenses soared by 446 percent. The cost of clothing and footwear increased by about 303 percent during the same period.
Meanwhile, restaurant and hotel prices rose by some 294 percent, and alcoholic beverage and tobacco prices rose by 198.22 percent.
Health care services, which are priced mostly at the official exchange rate of LL1,507.5 to the dollar, increased by about 26 percent year over year.
However, this figure does not reflect the fact that hospitals and pharmacies are running low on medication due to the central bank’s alleged failure to provide subsidized dollars to cover their outstanding imports. The situation has prompted medical practitioners and officials to warn that the healthcare situation in Lebanon is on the verge of collapse.
The price of domestic water, electricity, gas and other fuel supplies increased by about 91 percent year over year in May despite BDL’s subsidy scheme. This is in part due to residents being forced to shoulder the cost of pricey private electricity generators as the state electricity utility offers less and less power amid fuel shortages.
Tuition at most schools and universities is also still priced at the official exchange rate, with the education sector experiencing a 10 percent price increase in May 2021 compared with a year before.
Even as health care and education costs do not mirror the trend of price increases, medical professionals and teachers, whose salaries are mostly still paid in lira and have not been adjusted for inflation, have gone on strike on several occasions to protest deteriorating living conditions.
Transportation costs rose by about 256 percent, even though the government’s subsidy program was covering 90 percent of fuel imports using its dwindling dollar reserves. This may be attributable to rising costs of public transit such as taxis, vans and buses; maintenance, which often must be paid in dollars; and fluctuations in international gas prices.
Transportation prices are set to climb ever higher in the months ahead, as BDL’s reserves near the mandatory minimum level and government officials have repeatedly said they refuse to tap into the reserves to continue financing the country’s current subsidy program, which costs about $6 billion annually. The central bank warned last week that it would stop funding fuel imports; importers have said that if fuel subsidies were removed, prices would increase by nearly five times.
At the start of July, commercial banks are expected to begin repaying dollar depositors $800 — $400 in fresh dollars and $400 at BDL’s market rate, which currently stands at LL12,000 — to honor deposits made before the end of Oct. 2019. The International Monetary Fund warned that this scheme risks a further depreciation of the national currency, which would worsen inflation.
Such a result “would be highly detrimental to standards of living,” the IMF said.
BEIRUT — Inflation soared by more than 100 percent year over year in May for the 11th month straight. But recently reported price increases, though staggering, are only a taste of the skyrocketing costs Lebanese are set to face as an end to subsidies on essential goods looms but officials continue to slow-walk an alternative strategy.The consumer price index for May, published on Tuesday by...