Impact of Changes in the Customs Dollar Rate on Inflation and Government Revenue: An Update

We will update in this spotlight the impact of changes in the customs dollar rate on inflation and government revenue. We start by presuming that the average customs rate based on (available) data is estimated at 2.5% (see appendix below).

December 2021 – December 2022:

The customs dollar rate increased from 1,500 LBP per 1 USD to 15,000 LBP during this period — an increase of 900%. As such, this should have increased import prices by 900 x 0.025 = 22.5%

On the other hand, the year 2021-2022 witnessed the following:

– Average exchange rate increased by 53% from 27,483 LBP to 42,133 LBP

– Average prices increased by 122% from index 921.4 to 2045.5

– Currency in circulation (CC) increased by 76% from 45.7 trillion LBP to 80.2 trillion LBP

So we can tentatively conclude that: 22.5% of the 122% price inflation came from the higher customs dollar; 53% came from the weaker exchange rate prices; and the remaining were a combination of higher international prices (due to the Russia-Ukraine war) and monopoly pricing by sellers, especially that they can blame the higher customs dollar for the higher prices that they charge.

Also, we can conclude that the depreciation of the exchange rate by 53% was a product mostly of higher CC and LBP liquidity by 76%.

for the full article, click on the link below:

Impact of Changes in the Customs Dollar Rate on Inflation and Government Revenue- An Update


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