After prolonged marketing and promotion of the Lebanese government’s tendency to raise the customs dollar, as a way to raise the revenues of the public treasury, in order to help improve the state’s position in dealing with the collapse, the “incident” occurred and the customs dollar was calculated at the price of 15,000 pounds, during the approval of the House of Representatives, Last week, the general budget law for the year 2022.
As soon as this step was adopted, questions began regarding its actual returns to the treasury, positively, as the government wants, and negatively, according to many, because it was incomplete without a comprehensive economic plan. Noting that the matter still needs to be issued a decree to be published in the Official Gazette to become definitively effective.
An expert in macroeconomics and monetary policies, Layal Mansour, approaches the issue from a purely specialized economic point of view. She points out that “the customs dollar has risen 10 times, but it is still much lower than the dollar exchange rate in the market,” pointing out that “this decision is not a fad invented by the Lebanese, but we have witnessed something similar in many countries.”
Mansour explained, in an interview with the Lebanese Forces website, that “in many countries, when the exchange rate is volatile or high, officials take a similar step with the intention of helping the people and as a kind of service to them, on the basis of setting a customs dollar price lower than the market price.” However, she added, “This scenario, and in the context in which it was approved, is incomplete.”
She added, “When the state enables citizens to raise the customs dollar to 15,000 LBP. Only, not to 30,000 L.L or more, it must simultaneously give them an alternative, in exchange for the burdens they will bear. That is, the state must have developed a rescue plan, a program that creates job opportunities for citizens, and so on, and makes it clear to them that they will be able to pay the increase on the customs dollar and bear the consequent increase in the prices of goods and services, and others.”
And she stresses, that “raising the customs dollar in any country coincides with an integrated economic plan, not on its own. Meaning that the state imposes additional costs on the citizens on the one hand, but it helps them and provides them with opportunities that enable them to coexist with the situation in a non-stressful way on the other hand.” However, since the customs dollar was raised without a comprehensive rescue plan, Mansour considers, “The situation in this case turns to be very harmful, because prices will rise more, knowing that they have basically doubled regarding 20 times and the purchasing power has almost disappeared.”
And she considers, “Raising the customs dollar in a country where there is no law respected, no judiciary is prosecuted and accountable, and matters are uncontrolled and borders and crossings are not controlled, such as Lebanon, means encouraging smuggling to great degrees. We will reach a situation where the bad citizen or the one who does not respect the law will no longer search on his own for smuggled goods, due to their lower prices than others that enter legally and pay taxes and customs tariffs, but even the ideal and class citizen, so to speak, will search for the smuggled goods Because it is without tax and the price is cheaper.”
And he pointed out, “Due to the collapse of purchasing power in Lebanon, there are no longer rich or affluent classes, or even middle classes, in the form they were before the outbreak of the crisis. According to all studies and reports issued by specialized local and international institutions, poverty rates in Lebanon exceed 80% of the population. Therefore, this confirms that what the government hopes to increase treasury revenues with the increase in the customs dollar and the improvement of the situation will not be achieved, because it came as an isolated step that cannot be adopted if it does not come within an integrated plan, not separately.
Mansour notes, “In principle, the objectives of raising the customs dollar may be beautiful and good, to supplement the treasury with a quantity of money and invest it in operating the wheel of the state, projects and the economy in general. But when it is an incomplete step isolated from a comprehensive plan, it leads to very bad results and aggravates the situation further.”
She adds, “The tax increase or tax correction means that the state expects to increase revenues, but when the increase comes as an incomplete step, the state will not reap more revenues. And the opposite may happen, because smuggling will double, and therefore customs revenue rates may decline and even drop from the current rates.”
And she stresses, “The development of tax and monetary policies and taking decisions in this regard is not done randomly and overnight, but rather in a carefully studied manner and a clear comprehensive plan. We are not, for example, regarding a student who does a quick revision before he takes the exam, as he aligns a few words and gets (10/20) (and goes for it). Rather, we are in a fundamental problem and we cannot get less than a result in the exam we face (20/20), otherwise we will fail. Either it is an integrated plan and all ministries and state institutions are working in harmony with each other to implement it, with full clarity of the negatives and positives in it, or it can only be called a failed plan.
Mansour fears, “With the customs dollar being raised and the lack of an economic vision to this degree, Lebanon is heading to liberalize the currency exchange, unfortunately, and this is what frightens me the most. (Oh Mahla) the collapse we are experiencing, and a dollar for 60 or 70 thousand pounds in exchange for the liberation of the currency, and I hope that we will never reach the liberation of the currency because the bad results of that are unimaginable.”
And you see, “We are going in this direction, because usually countries that set a customs dollar price that does not match the actual exchange rate, are in the process of liberalizing the currency, considering that the dollar is volatile, but the price of the dollar in those countries is volatile to a small percentage. That is, in a particular country, the real dollar is volatile between 1,000, 1.100 and 10.50, for example, they adopt a customs dollar of 700, as a kind of service to citizens, as we mentioned.
And he hastened to warn, that “in Lebanon, if we go to liberalize the exchange rate, the dollar will not be 1,000 and 1,100 or 30,000 and 31,000, we will be facing a dollar that rises daily, if not between hour and hour and 24 hours a day, because Liberalizing the currency is incompatible and does not correspond to and contradicts a dollarized country, as these two issues are not homogeneous in any way,” expressing her fear, that “setting a price for the customs dollar is different from the market price, which indicates that there is a tendency to liberalize the currency.”
Even as a matter of research, Mansour adds, “If we assume that raising the customs dollar is a good thing, in the future and with the liberalization of the currency exchange, it will be without any benefit. Let us imagine the real dollar at 100,000 pounds and the customs dollar at 15,000 pounds. What benefit does the treasury and the economy reap? no thing. Shall we then raise the customs dollar to 30,000 liras and then to 40,000 liras, and so on? Which means that we will remain in the same cycle, but rather to further decline and collapse.”
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