The implementation of the new “customs dollar”

The implementation of the new “customs dollar”

Omar al-Rassi | Thursday 24 November 2022

Omar al-Rassi, “Akhbar al-Yawm” agency

Traders are not affected, but their profits return to normal size

After the new official exchange rate set at 15 thousand was scheduled to enter into force at the beginning of November, and it did not happen, the minister of Finance in the caretaker government, Youssef Khalil, announced yesterday that "the ministry sent a letter to the Bank of Lebanon regarding the start of calculating foreign currency rates on taxes and fees collected by the customs administration on imported goods, based on 15 thousand liras per US dollar, starting from 1/12/2022, and pointed out that this measure helps reduce the exploitation of price differences as well as reduce losses which is incurred by the Treasury".

This came after the governor of the Bank of Lebanon, Riad Salameh, revealed that the central bank will start working at the rate of 15,000 LBP per dollar starting from the first of February 2023, and circulars 151 and 158 will become 15,000 instead of 8,000 and 12,000 starting from the first of February. Salameh said that "We have entered the stage of unification of exchange rates and this began with the customs dollar, which was decided by the Ministry of Finance along with other duties and taxes".

So, what is expected at the price level in light of the prevailing chaos and the absence of firm and decisive decisions?

An economic reference pointed out, via the "Akhbar al-Yawm" agency, that the government has had the authority to set the exchange rate since the sixties of the last century, pending the adoption by the House of representatives of a law setting the rate, and therefore there is no legal violation in what the minister of Finance did, which came from what was approved by the general budget for the year 2022. Also, the central governor did not take any decision related to the exchange rate randomly, but based on the decision of the government.

About the fear of losing control, the reference said: so far, the mechanism is still controlled, because the exchange rate hike did not come in line with the price set via the Sayrafa platform, saying: if the platform Price was adopted, it would have led to a big shake, and therefore what happened was to raise the exchange rate to an intermediate ceiling, although everyone realizes that this price is not logical, because the price set in the market is about forty thousand.

Is there a better way than raising the dollar rate to 15 thousand? The reference explained that this process is an experimental "test", since the price is lower than the black market price and less than Sayrafa, the damage that will appear can be remedied. He pointed out that the governor of the Bank of Lebanon announced the start of the phase of liberalizing the exchange rate, which means that the process consists of several steps, based on the decision of the government and the recommendations of the International Monetary Fund, which means that the rate will rise further unless there is an agreement with the IMF and the latter requested to maintain the rate of 15 thousand.

But will the central bank be able to unify rates? The reference replied: It does not have an army or security forces, meaning that compliance with the price cannot be achieved without stopping smuggling, which is a big and fundamental problem, especially since it leads to the demand for a large amount of dollars from the black market in order to import goods and smuggle them to Syria, knowing that stopping smuggling leads to a decrease in the price of dollars on the black market. From this point of view, there is a problem at the level of the executive authority, which is completely absent from controlling things.

In response to a question, the reference considered that the new financial measures will put an end to the profits of traders, which have doubled a lot, as traders price any commodity based on the exchange rate on the black market without taking into account that customs duties and VAT are calculated on the price of 1500 LBP per one dollar. It can be said that merchants pay 5% of the value of these taxes that they collect from consumers, meaning that merchants earn more profits than the profits of the state, and therefore their power has become stronger than hers.

In this context, the source denied that these measures will be a blow to traders, especially after what they imported over the past months in anticipation of raising the official dollar rate, saying: traders cannot in any way be a victim, whoever becomes so goes directly out of the market.

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