Lebanon vows crackdown on smuggling into Syria

Lebanon on Thursday (May 14th) ordered the seizure of all contraband goods at its border with Syria after a controversy over fuel smuggling, as both countries face economic crises.

Lebanon is mired in its worst economic crunch in decades and public pressure has mounted for a tougher approach to smuggling, especially of fuel and flour.

The cabinet on Thursday ordered the seizure of "all goods illegally entering or leaving Lebanon", said Information Minister Manal Abdel Samad.

Vehicles used by smugglers would be confiscated by the army and internal security forces, she said.

The army says that between May 7th and May 14th, it seized about 215,000 litres of fuel oil and 71 tonnes of flour at the Lebanese-Syrian border, arresting 25 people.

The country had faced a political crisis, a currency meltdown and de facto capital controls in the months before the coronavirus pandemic forced a nationwide lockdown.

The state spends billions of dollars on subsidies on essentials such as fuel and flour, but smugglers often sell them in war-torn Syria at a hefty mark-up.

The border between the two countries has been closed in a bid to stop the spread of the novel coronavirus.

But the mountainous region is difficult to control and Syria's nine-year civil war has seen a surge in smuggling activity.

Lebanon's announcement Thursday came after Justice Minister Marie-Claude Najem ordered a probe into "operations to smuggle large quantities of fuel oil across the border".

Lebanon ready to float pound after aid

On Friday, Finance Minister Ghazi Wazni said that Lebanon, whose currency has been pegged to the dollar for 23 years, is ready to float the pound only after it secures billions in aid.

Speaking to AFP after talks started Wednesday with the International Monetary Fund on a plan to rescue Lebanon's free falling economy, he also said a restructuring of the banking sector would entail halving the number of banks in the country.

A hard currency crunch in recent months has strained the official fixed rate of 1,507 to the dollar, with the pound losing more than half of its value to fetch well over 4,000 on the black market.

"The IMF always asks for the freeing of the pound's exchange rate," Wazni said.

But "we need to change the stabilisation policy to one of a flexible exchange rate in a first stage and for the foreseeable future," he said, referring to an initial managed floatation.

"When we receive financial support from abroad, we will transition to floatation" according to the market, he said.

"The Lebanese government has asked for a transitional period to pass through a flexible exchange rate before we reach floatation," he added.

Wazni said the first phase would involve "a gradual increase of the exchange rate to the dollar", in co-ordination with the central bank.

He said this was necessary because the government feared "huge deterioration of the pound exchange rate" otherwise.

Lebanon, which was hit last autumn by unprecedented protests, asked the IMF for financial assistance on May 1st after laying out a much-awaited financial rescue plan.

That plan aims to drum up billions of dollars in aid, reduce the deficit, restructure a colossal debt, and reorganise an oversized banking sector.

Wazni said the restructuring would be done "step by step".

"Lebanon counts 49 commercial banks and it is normal for that number to decrease to around half of that in the next stage," he said.