Lebanese Power Stations Shut Down as Crisis Deepens

(Bloomberg) -- Lebanon is struggling with severe electricity and water shortages after two of the country’s main power plants ran out fuel, the latest manifestation of a financial crisis that shows little sign of ending.

Electricite Du Liban (EDL) said its stations in Deir Ammar and Zahrani - which together provide about 40% of the country’s electricity - were shut down Friday. Foreign correspondent banks have yet to approve transactions that will allow EDL to unload two fuel shipments waiting at port since last week, it said in a statement.

In separate comments, EDL in the eastern city of Zahle asked residents to reduce consumption, saying the “power supply has been cut across Lebanese territories indefinitely.”

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Lebanon has been reeling since late 2019 from its worst financial meltdown in decades. The currency has collapsed, driving inflation into triple digits and wiping out life savings. The government is bankrupt, has defaulted on its international debt and has failed to take the measures required to clinch international support.

Lebanese households already rely on subscriptions to private backup generators as mismanagement and corruption mean EDL has for years failed to provide 24-hour electricity.

As foreign reserves at the central bank dwindle, however, so has the power supply, with EDL now providing only a few hours a day. At the same time, private generators are now also being shut down for long stretches every day to preserve scarce fuel and rest engines not designed to be the main source of power. Videos have spread on social media in recent weeks of fires allegedly caused by overheated or faulty private generators.

Water companies have asked people to reduce their consumption to a minimum after being forced to shut water pumping and distribution stations due to the power shortage. The North Lebanon Water Company announced a “state of high emergency.”

Lebanon’s central bank has been effectively subsidizing fuel, medicine and food items through preferential exchange rates, but is fast running out of funds in the absence of a functioning government and a plan to stabilize the economy. The result is a severe shortage not only in fuel for electricity but in widely-used drugs from anti-biotics to heart and cancer treatments, as well as gasoline, with motorists waiting for hours to fill their tanks.

Fuel, Medicine Shortage

Last month, the central bank began supplying dollars to fuel importers at a rate of 3,900 Lebanese pounds, rather than the now-largely defunct official rate of 1,507 pounds. The measure, despite higher prices at the pump, was meant to help ease petrol shortages but has so far failed to make an impact as much fuel is reportedly smuggled into Syria, where it fetches far higher prices, or is being hoarded by Lebanese worried prices will rise further.

Pharmacies also shut their doors Friday to protest the widespread shortages which some say have also been exacerbated by middle-men hoarding supplies in expectations that the subsidies will eventually end.

Distortations are upending the economy as the pound nears 20,000 per dollar on the black market, rendering once respectable salaries worthless.

Officials have warned that money’s running out to finance such hefty subsidies but are also worried about the social impact of ending them. The crisis has already pushed more than half the population below the poverty line with the United Nations warning of growing food insecurity in what, until recently, was considered a middle-income country.

Politicians have not yet agreed on a new government to replace the caretaker one, which resigned after an explosion ripped through Beirut port, killing at least 200 people.

The international community, including Gulf countries which supported Lebanon in the past, has repeatedly urged politicians to form a new government empowered to enact reforms and unlock donor funds.

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