Lebanon suffers from 24-hour power outages, food poisoning, and fuel crisis leading to business closures

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On March 16, 2021, in front of the Central Bank of the Lebanese capital Beirut, an anti-government demonstrator waved a national flag while protesting against the deteriorating economic situation. They blocked the streets with burning garbage bins.

Joseph Ide | AFP | Getty Images

A total power outage in Lebanon last weekend prevented its 6 million people from being able to concentrate power generation 24 hours a day.

The State Power Corporation said in a statement that due to fuel shortages, the shutdown of the country’s two main power stations “directly affected the stability of the grid, resulting in a complete power outage, and operations cannot be resumed during this period”. .”

After the Central Bank provided $100 million in credit to the Department of Energy to buy fuel and keep its factories operating, power was restored later on Sunday. Officials warned that the power outage could last for several days.

This crisis has brought a nightmare to the residents of the country, but it has been brewing for a long time.

Natural gas shortages may sound familiar-the UK and the rest of Europe are in the throes of a growing fuel crisis, which has led to panic buying and irregular behavior for many people who have never thought of facing such shortages.

But for Lebanon, the same problem has become a reality in the past few months-this is just another battle in a long list of crises that have caused the country’s multiple daily power outages, banking and economic crises, food shortages, and hospitals to be overwhelmed. And spiraling upward. Currency depends on volatile black market exchange rates.

Walk through the capital Beirut-a once prosperous city, often referred to as the “Paris of the Middle East”-at any time of the day, you can see storefronts closed or operating in the dark, and those lucky people rely on backup The fuel gets a fuel generator to keep the lights on. When there is a power outage, many shopkeepers will refuse to sell anything except water, because the value of Lebanese Lira fluctuates every minute, which means that the price of goods may shift from one period of electricity to the next.

Hundreds of businesses destroyed in the devastating Beirut port explosion in August 2020 have also disappeared forever. With little help from the state, the entrances of destroyed bars and other businesses were blown up, and the entrails filled with debris were still fixtures on city streets.

Due to the worsening fuel and power crisis in Lebanon, shopkeepers reduced their inventory of perishable items, and refrigerator shelves across Beirut were empty. The owner, Rabih Daou, only keeps one refrigerator running and relies on his backup generator to save electricity. Beirut, Lebanon, September 24, 2021.

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“This is catastrophic,” Rabih Daou, a small grocery store owner in Beirut’s Geitawy district, told CNBC in his store in late September that his store was completely dark during many daily power outages in the country. He pointed to the empty refrigerator shelf, where there was only a small refrigerator in operation, which contained some dairy products.

“We can’t buy a lot of things. We can’t buy cheese and ham. We have to buy small pieces because we don’t always have electricity and people are always afraid,” he added.

Rabih Daou, a shopkeeper in Beirut’s Geitawy district, stood next to his generator, which was the only source of electricity in Lebanon during the hours-long power outage every day. The country’s fuel crisis has made it more difficult to obtain fuel to run generators. Beirut, Lebanon, September 24, 2021.

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A lesser-known consequence of the Lebanese fuel and electricity crisis is widespread food poisoning, as grocery stores, restaurants, and households struggle to keep their products fresh despite power failures and summer heat. Since the beginning of summer, most areas of Beirut have been without electricity at night. Residents said the consumption of meat and dairy products has dropped sharply.

“They don’t want to buy ham, cheese and yogurt because they are afraid that if we don’t have electricity, the food will not taste good,” Daou said.

How did Lebanon get to this point?

The sectarian party leaders and warlords still in power during the Lebanese Civil War from 1975 to 1990 have committed decades of corruption, destroying the country’s finances and public services.

For many years, due to serious mismanagement in the power sector, Lebanon has been controlling power outages every day. But Lebanese are accustomed to this; those who can afford generators use them to keep electricity running, including many businesses in the country. Power outages are usually predictable and will not last long.

However, due to the beginning of a nationwide fuel shortage in early summer, even fuel-operated backup generators cannot always help. Many residents cannot use their cars, some lines at gas stations stretch for miles, and occasionally drivers leave the vehicle and fight.

The gas station destroyed in the Beirut port explosion in August 2020 has not been repaired in the Mar Mikhael district of the city, more than a year after the explosion. Beirut, Lebanon, September 25, 2021.

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More than 80% of Lebanon’s food and commodities need to be imported, including fuel. The radical and political group Hezbollah smuggles fuel into Syria, as well as other groups and companies hoarding fuel to sell on the black market at higher prices, which helps to weaken the country’s supply and push up prices.

The Lebanese Central Bank is now restricting the import of subsidized fuel because it has used up the dollar used to support the economy. The bank is making slow progress in providing credit lines to fuel importers and gas stations and has now terminated its subsidies for diesel.

This makes it impossible for many of Lebanon’s population of 6 million to afford this commodity-according to the World Bank, 78% of them have fallen into poverty in the past two years, which is one of the worst depressions in modern times.

The Lebanese Central Bank did not respond to CNBC’s request for comment.

Collapsed currency

Since the 1990s, the official exchange rate of the Lebanese Lira has been fixed at 1,500 liras to the U.S. dollar. However, the actual exchange rate for cash on the black market hovered between 13,000 and 18,000 lire in September. It currently trades at approximately 19,250 against the U.S. dollar.

Marwan Sweidan runs a popular ice cream shop called SmushKies in the Mar Mikhael district of Beirut. He said he was fortunate to be able to afford fuel for his generator, otherwise it would be impossible to keep his goods cold and open. But to do this, he needs dollars.

“You can buy unsubsidized diesel, but you have to pay in U.S. dollars,” he said. “It’s like 600 US dollars per ton; the cost has risen a lot, and there are a lot of new electricity costs suddenly appearing, which makes it even more difficult.” This is the first time that the Lebanese government has priced a commodity in US dollars.

Physics student Antonella Hajj Nicolas (Antonella Hajj Nicolas) will spend a few hours at SmushKies just to get electricity. “Since last night, our house has no electricity and the generator is not working. This place has electricity and Wi-Fi, so I came to study for a few days of exams,” she told CNBC. As for perishable food, her family cannot store it at home.

“We don’t have food in the refrigerator because we don’t want to be poisoned… We buy food on the spot every day,” she said.

Running out of savings

Lebanon has one of the highest debt-to-GDP ratios in the world.

Since the financial crisis broke out two years ago, when the country defaulted on huge debts (including 31 billion U.S. dollars of euro bonds still outstanding), the Lebanese economy has been in a state of rapid acceleration in free fall.

When Beirut had power outages several times a day, the owner, Dede al Hayek, lit a candle in front of her store. Beirut, Lebanon, September 25, 2021.

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Due to lack of confidence in the government’s ability to implement reforms and eliminate corruption, governments and institutions that have promised to provide assistance to the country still refuse to provide assistance. Western officials have expressed concern about the prospects of further instability or collapse of a country. Many armed political and militant organizations .

The large-scale protests in Lebanon began in October 2019, when the currency plummeted and eventually depreciated by 90%. Lebanese depositors have been locked out of foreign currency accounts, while those who kept their deposits in the lira watched their life savings go to naught.

Dede Al Hayek was standing next to her dim snack bar in Beirut’s Geitawy district, which she had to close due to the financial and fuel crisis in Lebanon. Beirut, Lebanon, September 25, 2021.

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Dede el Hayek is a grandmother who ran a once-busy snack bar in a residential area of ​​Beirut. Now she sits alone at the dim entrance of the store every day, chatting with her neighbors occasionally. Since she could not afford the fuel to keep the generator running, she had to close her business and now sleeps in a crib in a storage room at the back of the store.

“I don’t have enough money to run the generator. I have stopped working three months ago,” she said, pointing to the empty shelves. “No one comes in here anymore.”

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