Transfers to EDL Dropped by an annual 37.1% to $631.39M by August 2020

According to the Ministry of Finance, transfers to EDL stood at $631.39M by August 2020, dropping by 37.1% compared to the same period last year. This was mainly due to lower payments to KPC and Sonatrach for fuel oil purchases, and lower debt services.

In details “Payments to fuel and oil gas suppliers KPC and SPC”, constituting 99.74% of total transfers, slumped yearly by 37.1% to $629.77M by August 2020, as the volumes of fuel and gaz oil imported decreased by 13.82% and 15.38%, respectively. Worth mentioning that the average crude oil price retreated annually by 37.11% to 41.01$/barrel in the first 8 months of 2020.

EDL contributed 0.09% of the total Jan-Aug 2020 oil bill, lower than the 0.38% share paid in the same period last year, out of a higher bill of $1B. In nominal terms, EDL’s contribution amounted to $563,847 by August 2020, compared to $3.86M during the same period of 2019.

EDL transfers represented a share of 8.6% of the government’s primary expenditures (excluding interest payments), which reached $7.32B by August 2020, compared to a higher share of 13.7% last year.

Lebanon’s current state of energy sector is worrying, and rehabilitating the sector is a top priority for the international community. Moreover, it cannot be separated from the macroeconomic reform package being negotiated with the International Monetary Fund (IMF).

Rehabilitating the electricity sector in the country rests on two main pillars. First, improving governance and second, the transition to efficient and clean power production. Since the central bank is witnessing diminished hard currency reserves that make the long standing subsidies of electricity impossible to maintain, the main challenge for the government is keeping the lights on for the upcoming months.

Overall, Lebanon is at risk of plunging into the dark if the government fails to initiate macroeconomic reforms and negotiations with the IMF. Such reforms need political will to be put in place, and one can only hope that they are initiated due to the urgent situation in Lebanon.

EDL Contribution from Total Oil Bill by August 2020

Transfers to EDL Dropped by an annual 37.1% to $631.39M by August 2020


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