Key Takeaways:
- The Lebanese Pound (LBP) was relatively stable throughout February after rebounding in January. It is unclear whether the Central Bank will be able to maintain the rate, especially in the face of declining reserves and a rising trade imbalance driven in large part by higher global oil prices, and an increasingly nervous market. Further currency volatility is expected to occur in the coming weeks.
- Russia’s invasion of Ukraine is expected to have profound consequences for Lebanon, including higher grain and petroleum prices. Fuel imports constitute the largest drain on Lebanon’s scarce FX reserves, in part due to the country’s inefficient electricity sector. Fuel is also a major cost driver across all value chains.
- The 2022 draft budget was finalized by the government on February 23, following a onemonth- long review and amendment process. Major changes were made to tariff and tax structures, which will lead to higher prices if the budget is approved by the parliament.
- Lebanon concluded its first round of talks with the International Monetary Fund (IMF) on February 11. Negotiations between Lebanese officials and the IMF began in January, after the government presented an “agreed upon” figure of financial sector losses in December. The IMF issued a statement indicating that an agreement is far from completion, in large part because reforms needed to unlock funding have not been implemented.
- Public utility fees in Lebanon are set to increase, resulting in a higher cost of living. Increased water fees and higher electricity bills are expected in the months ahead, which will negatively affect households and businesses, while no meaningful wage adjustment is expected.
- Lebanon plans to begin distributions of the World Bank-funded Emergency Social Safety Net (ESSN) at the beginning of March. The two-and-a-half-month registration window closed at the end of January with 1,472,411 people registering, about 20 percent of the population. When analyzed against vulnerabilities and growing needs (i.e. MSNA findings), it is clear that households which applied for ESSN/Ration cards are concentrated in districts with low food security as well as districts where households rely on credit to buy food and finance household budgets.
By Crisis Analytics Team, Mercy Corps Lebanon
