Lebanon was grappling with the worst economic crisis in its history even before the public health crisis caused by the pandemic. The government defaulted on its foreign debt last year amid growing public debt, dwindling revenues and foreign currency
Banks closed their doors for two weeks and restricted transfers and withdrawals as nationwide protests spread and the local currency tumbled. Pegged to the dollar for nearly 30 years, the Lebanese pound has now lost 80% of its value as a black market thrives.
Unemployment worsened, inflation soared and nearly half of the population is now living below the poverty line. Repeated lockdowns and restrictions because of surge in coronavirus cases has added to the hardship.
In a sign of the deepening crisis, the government in June raised the price of flatbread, a staple in Lebanon, for the first time in a decade by more than 30%. It has since raised the price twice before Monday.
Economy minister Raoul Nehme said Monday the price of a bag of flatbread would be revisited if the local currency gains strength in the face of the dollar or if the price of wheat worldwide decreases.
For now, Nehme said a small bag of flatbread will sell at 1,750 Lebanese pounds (20 cents at black market rate), up from 1,250 pounds (14 cents.) The weight of the bag would increase by 50 grams (1.7 ounces).
The owner of a well-known nationwide bakery, Assaad Bou Habib, said he expects yet another price hike soon as the government's foreign reserves dwindle. He said his business, Wooden Bakery, is surviving only because of franchises it has elsewhere in the region.
“If we didn't have branches abroad, our situation in Lebanon would have been catastrophic,” Bou Habib said.
Bou Habib's bakery, which also sells other baked goods, has mainly been selling basic bread as consumers struggle economically. He said he has already had to tap into his company's reserves and has stopped making a profit.
To make matters worse, ingredients essential for baking, such as sugar and yeast, are also in short supply, Bou Habib said.
“This is a danger for every bakery,” he said.