Bread Crisis Defused
If the Economy Ministry has its way, Lebanese consumers who faced a 20-percent increase in the price of bread this week may find that, at least for now, the hardship will have been short-lived. The ministry announced Thursday that, effective Friday, an increase in government subsidies will lower the price charged to bakers for a ton of flour from $250 to between $200 and $220. The move was designed to bring the sale price of 1,250 grams of Arabic-style flat bread back down to LL1,500 after a day at LL2,000.
The subsidies were the second put in place since Tuesday, when bakers announced their price increase. The first subsidy brought the price of a ton of flour in Lebanon to $250. The global market price is $460 per ton.
Bakeries Association Chairman Kazem Ibrahim also announced that bread price would return to pre-crisis standard as of Friday morning.
The new subsidies mean the government”s contribution to maintaining the price of Arabic bread in Lebanon now exceeds $60 million a year.
Most bakeries across the country raised the price of Arabic bread to LL2,000 on Wednesday, despite warnings from Economy Minister Sami Haddad to hold the line.
Observers noted that the Economy Ministry did not slap any penalty against bakeries that raised prices, as it had threatened to do.
The announcement of the new subsidies followed a meeting earlier in the day between Haddad and Union of Bakeries cheif Kazim Ibrahim.
But despite Haddad”s statements of support for the union, the two parties were unable to immediately reach a solution due to conflicting concerns. The Economy Ministry has to worry about the Lebanese people”s ability to buy bread during rough economic times, while the Union of Bakeries must help its members turn a profit even as the prices of oil, flour and sugar continue to rise.
Ibrahim reiterated Thursday the challenges that Lebanese bakeries faced amid general inflation, which is linked to the surge in oil prices and the subsequent rise in the cost of all raw materials.
The bakery sector was on the verge of bankruptcy, Ibrahim warned, and could not afford further losses. Before the Economy Ministry announced its additional subsidies, he said that bakers would stand by their decision to raise the price of Arabic bread to LL2,000 until further notice.
Also before the new subsidies were announced, Prime Minister Fouad Siniora said Thursday that the Lebanese government was seeking to protect the Lebanese public”s access to bread, "especially those with a limited income."
But he added that he didn”t want to see the bakery sector – or any sector – incur losses in what he described as the liberal Lebanese economic system.
Siniora said that after the rise in prices of wheat the Lebanese government was forced to subsidize the prices of flour.
"We used to buy a ton of flour for between $115 and $120, but two months ago we started buying the ton at $511," the premier added.
At the time, the government sought to cushion the blow of the price hikes on bakeries by selling the flour to bakers at the subsidized price of $320, rather than the market price of $511.
Meanwhile, the price of fuel-oil kept climbing. Siniora reiterated that Lebanon was not the only country dealing with the oil-price increase, which is a worldwide phenomenon. He also said the world was suffering from additional price increases as "new taxes have been imposed on wheat, rice and iron."