In December 2022, the exchange rate, at which imported goods are converted to Lebanese pounds (LBP) (also called the “customs dollar”) increased from 1,500 LBP to the dollar to 15,000 LBP to the dollar. This increase was voted into the 2022 budget and means that importers should now pay higher customs duties. Moreover, the budget included an increase in public sector employees’ wages by threefold.
LIMS explained that the aim of raising the customs dollar is to unify the official exchange rates with the Sayrafa platform rate, which is around 30,000 LBP to the dollar today. Therefore, raising the rate to 15,000 LBP to the dollar is only half the way and it will be increased once again, in 2023 or 2024.
Further to this, LIMS warned that in a country going through a major economic recession, the government would usually reduce taxes, fees, and tariffs, to facilitate the recovery. Part of this reduction would have happened automatically in Lebanon, when the exchange rate collapsed, since taxes and tariffs on dollar-denominated transactions were still paid on the old exchange rate. Readjusting the exchange rate without reducing taxes and tariffs will prevent the automatic adjustment from taking place and prolongs the recession. In fact, in 2022, growth was negative at -5%. Instead of increasing taxes and tariffs, the whole fiscal system should be reformed to prevent taxes and customs evasion.
For one thing, the customs dollar, in its current form, will negatively affect productive sectors, given the competition from illegal sectors that evade customs and smuggle. This situation will force companies to either stop their activity, or move their business outside Lebanon, or evade customs. Struggling businesses will deepen the current recession and delay economic recovery leading to disappointing revenues for the government. A higher customs dollar will decrease the competitiveness of local industries. For example, the tourism sector consumes imported goods to serve their clients. The increase in their costs will weaken the ability of the sector to compete with neighboring touristic destinations such as Turkey, Egypt, Cyprus, Jordan, and Greece.
LIMS also regretted that these salaries in the public sector are determined on the basis of a government decision and not based on real labor productivity. The salary increase included both productive and non-productive employees, which harms the public sector and leads to more inflation.
LIMS Media Interviews:
- Which Goods Are Excluded…And What Comes After The Customs Dollar? December 1, 2022: Anbaa, TV Interview AR
- Mardini To “Talk With Politics”: The Budget Deepens Recession And Increases Inflation, December 2, 2022: VDL, TV Interview AR
- Customs Dollar Entered Into Force. Will It Increase With The Approval Of Future Budgets In The Coming Years? December 2, 2022: Al Jadeed, TV Interview AR
- Fakrajian To “Asswate” Website: Multiple Exchange Rates Not Healthy, And Government Suffocating Citizens, December 2, 2022: Asswate, Article AR
- Customs Dollar On Its Way From 15,000 Lebanese Pounds To Sayrafa, December 7, 2022: Lebanese Forces, Article AR
- Significant Rise In Prices…Mardini Warns Through Hadath Online, December 7, 2022: Hadath Online, Article AR
- Dramatic Effect Of The “New” Taxes. Has Corporate Migration Begun? December 7, 2022: Lebanon Debate, Article AR
- Expatriate Remittances Support Purchasing Power And Do Not Improve The Lebanese Pound, December 7, 2022: Al Modon, Article AR
- Positives In The World Bank’s Report On Lebanon. What Is Their Importance And Are They Reliable? December 12, 2022: Leb Economy, Article AR
- Economic Collapse In Lebanon After Three Years, The Citizen Still Paying The Price, December 18, 2022: Al Yaum TV, TV Interview AR
- Financial And Economic Collapse And Continuous Deficit, December 24, 2022: VDL, TV Interview AR