Every time a part of his old grey Mercedes breaks, 62-year-old Beirut cab driver Abed Omayraat faces a tough choice: go into debt to import an expensive car part, or raise fares for customers whose wallets are already drained by a severe economic crisis.

It’s a dilemma he says has become more acute in recent months as Lebanon’s government moved to increase tariffs on imported goods about ten-fold in a country that ships in more than 80% of what it consumes – including spare parts he needs.

“My tires are finished now, you can see they’re worn out. When it rains, I’m worried the car will slide,” Omayraat said. Changing them is necessary, “but I can’t afford it.”

Lebanon’s economic meltdown, now in its fourth year, has seen the currency lose more than 95% of its value and left eight in 10 Lebanese poor, according to the United Nations.

With foreign currency coffers dwindling, the state has already lifted subsidies on fuel and most medication.

Hiking the rate at which the customs fee is calculated, officials say, will boost state revenues and is a step towards unifying various exchange rates.

They are among pre-conditions set by the International Monetary Fund in April for Lebanon to get a $3 billion bailout, but the lender of last resort says reforms have been too slow.

The tariff jump came into effect on Dec 1. Import taxes began being calculated at an exchange rate of 15,000 Lebanese pounds per dollar instead of the old 1,507, meaning traders suddenly had to pay much more to bring in products like home appliances, telephones or car parts.

That is set to pile even more financial pressure on people struggling to make ends meet.

Omayraat says many passengers already ask for discounts to the standard 40,000 L.L. ride fee.

“Do you tell a person that you want a 100,000 pound fare? I’m basically telling them: don’t ride with me. Neither can he (afford it), nor can I take him. He’s not able to eat and I won’t be able to eat,” Omayraat said.

Rabih Fares, an architect from northern Lebanon who began importing used cars when business slowed down, said the new rate was forcing car dealerships to boost prices or go out of business. 

“You need to work four to five years just to be able to afford the customs rate on a car now,” said Fares, who estimated fees to import one used car could average 94 million Lebanese pounds – or about 156 times the minimum monthly wage.

The finance ministry said revenues gathered in the 15 days since the decision came into effect showed a “huge difference” but said figures would be ready by the end of the month.

Parliament agreed on the rate in September but it was not rolled out until December – a delay that caretaker Economy Minister Amin Salam said allowed traders to load up on imports before the tariff hike, while increasing selling prices.

“When you announced it three months ago, it’s as if you are going and telling those who don’t want to work right in the market: go find a way to benefit. And this is what happened,” he said. 

It has left him sceptical that Lebanon will implement the reforms necessary to score a final IMF bailout in the coming months.

“As we are now, I in my personal opinion do not see it happening soon – which worries me because, as I said, each day of delay is costing the country millions and millions and costs the people pain and misery,” Salam told Reuters.
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“I feel anxious about inflation every time I go to the grocery store,” Caroline Fitzsousa, a bar manager in Baltimore, Maryland, told VOA. “And at work, my customers aren’t happy either. The rising cost of food and liquor caused us to raise prices. People are frustrated having to pay more for the same items they’ve always ordered.”

That frustration was felt across the United States in 2022, as global supply chain disruptions, Russia’s invasion of Ukraine, stimulative U.S. fiscal policies and other factors contributed to the highest inflation levels – and the biggest price increases for many goods and services – America has seen in four decades.

Inflation peaked in June when the consumer price index, a measure of the average change in the cost of goods and services compared to the year before, rose 9.1%. For October, the index was 7.7% higher, which economists saw as an improvement but still stubbornly high. 

The U.S. Federal Reserve aims for 2% annual inflation and has been aggressively raising interest rates in hopes of bringing it under control.

For consumers and businesses alike, the impact of rising prices and falling purchasing power has been plain to see.

“There are some nights that seem as busy as before the pandemic,” Fitzsousa said, commenting on her bar’s ability to attract customers, “but there are also plenty of patches of time when the bar is dead because people can’t afford to eat and drink out as much.”

She added, “You hear people complaining about places being overpriced, but there’s nothing we can do. If we’re going to recover from the pandemic’s losses and keep our doors open, this is what we have to charge. Things just cost more this year.”

Year of worry

A November survey conducted by U.S. News & World Report and The Harris Poll reported that 86% of U.S. adults were either very or somewhat concerned about the economy and inflation.

And, with the holiday shopping season under way, 41% of American consumers plan to spend less this year than they did in 2021, according to a CNBC All-America Economic Survey.

“In most current polls, you’ll see Americans rank higher prices and the economy as the country’s biggest problem,” said Robert Collins, professor of urban studies and public policy at Dillard University in New Orleans, Louisiana. “It ranks ahead of crime, border security, the environment, abortion, and everything else. The economy is top of mind.”

Despite it being a priority, Collins said this isn’t a challenge that can be solved quickly. Inflation takes time to go down, he warns, and relief will be slow and incremental.

For many Americans, such as Steve Ryan, an investor and professional poker player living in Las Vegas, Nevada, however, the need for relief is urgent. 

“I’m honestly worried about my ability to continue to afford living here,” he told VOA. “The stock market stagnated and it doesn’t seem like it’s going to rebound any time soon, but I have to sell my shares at rock bottom prices because I need to cobble together money just to afford my rent.”

And that rent, unfortunately, is rising. Ryan had to leave his apartment of more than a decade because the price nearly doubled after renovations were made. 

“I found a new place,” he said, “but it definitely costs more. And I’m paying for it while making less than I used to. At some point, I may just have to leave.”

Complicated economy

“It’s important to remember that the economy is very complex and very cyclical,” said Collins of Dillard University. “One of the things that caused the inflation we’re seeing now is the low unemployment rate most workers see as a good thing.”

In November, the economy added 263,000 jobs, keeping the national unemployment rate at 3.7%, which is near a half-century low.  

Robust job creation is usually associated with an expanding, vibrant economy. But finding workers to fill those jobs has been a challenge for many employers over the last two years.

“I love that workers are gaining more power,” said Fitzsousa in Baltimore, “but we’re having a tough time attracting the staff we need to run our business because there are less people to choose from and more jobs competing for them. As a small business our profit margins are so thin. It’s hard to keep pace with the higher wages corporate restaurant groups can pay to bring in workers.”

As employers offer higher wages to attract workers, the increased labor costs usually are passed down to consumers in the form of higher prices.

“Unfortunately, the increased wages workers are receiving aren’t keeping up with the inflation it’s helping to fuel,” explained Patrick Button, associate professor of economics at Tulane University in New Orleans.

That’s been the case for Lisa Martin, a teacher in Cincinnati, Ohio, whose dream of home ownership has been put on hold.

“Rent is so expensive and I know buying a house is a smart move,” she told VOA. “It’s a goal of mine, but my income isn’t high enough to allow me to save for a mortgage. I’m hopeful this year prices might come down a little.” 

Looking ahead

As the Federal Reserve keeps boosting interest rates, the heads of some large U.S. banks warn a recession could loom in 2023. 

“Those things might very well derail the economy and cause this mild to hard recession that people are worried about,” JPMorgan Chase & Co.’s chief executive, Jamie Dimon, told CNBC earlier this week.

It’s a worry for millions in this country, especially Americans nearing retirement.

“I feel the economy has affected those of us preparing for retirement in a big way,” 62-year-old Lisa Ash of Mandeville, Louisiana, told VOA. “Our lifelong savings – whether in the stock market or in our savings accounts – have taken a big hit and I don’t see that correcting itself in the next three years.”

She added, “I’m no longer thinking about buying another home or about traveling. I’m working.”

For all the gloom, some financial experts have a simple message: hang in there.

“Throughout history the economy expands and the economy contracts; business peaks and business troughs,” said Marigny deMauriac, a certified financial planner in New Orleans. “It’s called a cycle because it’s happened before and it will happen again. There might be some pain next year in the case of a recession, but the sooner there is pain, the sooner there will be relief.”
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