Key Takeaways:
- In an unexpected development, the Central Bank intervened in the currency market to stabilize the Lebanese Pound (LBP), which recovered from a low of LBP 33,000 to one US dollar (USD) on January 11, to about LBP 20,000 by the end of the month. The improvement came at a cost, with the Central Bank pumping hundreds of millions of USD into the market over the course of January, calling into question the sustainability of the intervention and whether its short-term gains will have damaging long-term negative repercussions.
- LBP depreciation through January 11 had an immediate, negative pass-through effect on the price of basic commodities and services. While there have been reported reductions in market prices since the LBP’s appreciation against the USD, initial impressions are that the change in LBP value is not having the same corresponding immediate positive impact on prices overall.
- In January, initial findings of the multi-sectoral needs assessment (MSNA) led by REACH were released alongside raw data. The data illustrates the destructive impact that the crisis is having on the Lebanese population, in addition to Palestinian refugees and migrants.
- The 2022 budget was completed by the Ministry of Finance, part of which was approved by the Cabinet on January 25. Of note is an increase in transportation allowances for public sector workers, in many cases doubling or tripling the basic salary, as well as support to contract teachers. Nonetheless, even with the introduction of a transportation allowance, most public sector salaries are insufficient to cover the basic needs of a family. This comes as the prices of services such as phone credit and electricity are expected to rise.
- Lebanese, Syrian, and Jordanian officials signed documents on January 26 to consolidate a deal according to which Jordan will supply electricity to Lebanon by way of Syria. However, significant hurdles remain before the deal can be finalized. Some Republican members of the US Congress are criticizing the deal, arguing that it undermines provisions of the Caesar Act.
- Kuwait’s Foreign Minister visited Lebanon on January 22, making him the first senior official from a Gulf country to visit Lebanon since a diplomatic row began in October 2021. The visit marks a possible step towards rehabilitated relations with Gulf countries, which in turn could have positive economic consequences.
- Established and new political parties kicked off their campaigns ahead of parliamentary elections in May. Saad Hariri announced that he is suspending his participation in Lebanese politics and will not take part in the upcoming election. This calls into question who, if anyone, will lead the Future Movement and what political role his brother, Bahaa, will play in mobilizing the Sunni electorate.
- Strong winter storms hit Lebanon in January, seeing temperatures dive below freezing at higher elevations, leaving much of the country blanketed in snow. Vulnerable populations unable to afford adequate shelter, fuel, and other forms of heating were most affected. Demand for heating fuel placed pressure on market supply and diesel prices, resulting in a black-market premium, at times 20% above set market prices. There were also reports of increased levels of tree felling for firewood, including in protected zones.
By Crisis Analytics Team, Mercy Corps Lebanon
