This reform monitor is supported by the Royal Norwegian Embassy in Beirut. The opinions expressed here do not necessarily reflect those of the donor. 

What Is the Issue at Hand?

Lebanon’s cost-of-living crisis reflects the cumulative impact of economic collapse, currency depreciation, and ongoing armed conflict, all operating within a highly import-dependent economy. While headline inflation has declined significantly since the hyperinflationary levels of 2023, this is not reflected meaningfully in cost reduction of essential goods or relief for households.

Survey data from the Lebanese Center for Policy Studies (LCPS) conducted in January 2026 with 2,400 respondents showed that 57.3% of respondents across Lebanon identify economic insecurity as their primary concern, with nearly half (46.7%) reporting rising living costs, most noticeably in Baalbek-El Hermel, followed by Keserwan-Jbeil, El-Nabatieh and Akkar (LCPS, 2026). These pressures are compounded by rising prices in essential goods—particularly food—alongside declining incomes and precarious employment conditions.

The divergence between macroeconomic trends and lived realities points to a central policy challenge: The costs most relevant to households remain high and, in some cases, continue to increase, even as inflation has eased at the aggregate level.

Why Prices Remain High Despite Falling Inflation

Official price data from the Central Administration of Statistics (CAS) show headline inflation declining sharply from 221.3% in 2023 to 12.2% in early 2026, while news outlets estimate an increase to 17.7% as of April 2026 (L’Orient Today, 2026).

However, this macroeconomic stabilization masks important divergences at the level of essential consumption. Food prices, in particular, have continued to rise across several key categories. An LCPS analysis of the Ministry of Economy and Trade (MoET)’s “Weekly Basket Monitoring Reports” over the years 2023-2026 shows sustained price increases across a range of essential food items. As a result, even as headline inflation slows, households continue to experience rising costs in their daily consumption.  

This divergence reflects structural features of the Lebanese economy. As a highly import-dependent system, prices are closely tied to exchange rate fluctuations, global supply chains, and fuel costs. In the absence of effective mechanisms to regulate how these costs are passed on to consumers, price adjustments remain uneven and often disproportionately affect essential goods. The result is a continued erosion of purchasing power despite improvements in aggregate indicators. This is evident in the table below, which shows the percentage change in prices across different food categories from 2023 to 2026.

Overall, the analysis of MoET data shows that the total essential food basket price change rose by 5%, 9%, and 13% a year between 2023 and 2026, indicating continued upward pressure on essential household costs even as headline inflation declines.

These dynamics likely reflect three interrelated factors: 1) imported inflation, driven by exchange-rate depreciation and higher import costs; 2) domestic market concentration among key importers and distributors, which weakens price competition; and 3) supply-chain inefficiencies that increase transportation, storage, and distribution costs. With approximately 85% of national consumption imported, these structural factors continue to exert upward pressure on food prices despite declining headline inflation (L’Orient Today, 2025).  

What Has Been Done?

The government’s response to rising living costs has primarily focused on price monitoring and enforcement. Through its weekly basket monitoring reports, the MoET’s Center for Pricing Policies tracks the prices of essential food items across supermarkets to help identify more affordable options. These reports implicitly identify a core basket of goods considered critical to household consumption and provide an important basis for monitoring price volatility.

Through the Consumer Protection Directorate (CPD), the MoET has also intensified inspection campaigns to monitor price hike violations and stabilize select essential goods, most notably bread as a semi-regulated good. In volatile environments, such measures help provide state oversight and a degree of protection for consumers.

Additional short-term initiatives were also introduced. For example, the “Sawa bil Siyam” (together during lent) campaign launched in February 2026 sought to ease pressures on essential food prices by offering a 15% price reduction on at least 21 essential food items. However, such measures remained limited in their broader impact.

Overall, current responses remain largely reactive and narrow in scope. Monitoring and enforcement alone are not sufficient to address the underlying drivers of price increases in an economy exposed to exchange rate volatility and import costs. In practice, enforcement capacity is uneven and resource-constrained, limiting the consistency and reach of inspections. At the same time, businesses often adapt to controls through adjustments in margins, product quality, or availability, limiting monitoring effects.

More fundamentally, the absence of a coherent pricing framework at the market level means that inflationary pressures are transmitted unevenly, particularly for essential goods. Current responses focus primarily on monitoring violations after prices rise rather than proactively managing price pressures in markets.

In practice, Lebanon lacks mechanisms to improve coordination and stability in the pricing of essential goods. As a result, existing measures help contain the most visible excesses, but do little to systematically protect household purchasing power or moderate volatility in core consumption items.

Bridging the Gap: Toward Market-Level Price Management

The limitations of current responses highlight a missing structural layer in Lebanon’s economic governance. While enforcement mechanisms operate primarily at the micro level, and macroeconomic reforms remain stalled, there is limited intervention at the level of price indexing and control.

Addressing the cost-of-living crisis therefore requires moving beyond ad-hoc enforcement toward more structured mechanisms that improve coordination and stability in the pricing of essential goods. Such mechanisms would not eliminate price pressures, but could help moderate their impact on households and improve stability in volatile conditions.

Recommendations

To move beyond reactive price controls, Lebanon needs more structured, market-level mechanisms to manage the pricing of essential goods in a volatile and import-dependent context:

• Introduce a bounded pricing structure for an essential goods basket

The government, in coordination with major retailers, could define a limited basket of essential food items sold within controlled profit margins. Unlike ad hoc price ceilings, this approach would focus on stabilizing high-frequency goods that shape household consumption and perceptions of inflation. Effective implementation would require retailer cooperation, regular monitoring, and margin levels that discourage supply shortages and informal market activity. France adopted a similar approach in 2023 to help contain food price pressures and protect purchasing power.

• Establish a price banding mechanism linked to key cost drivers

Complementing this, authorities could establish an index-based price banding mechanism for essential goods. Rather than relying on fixed price ceilings, allowable price ranges would be linked to a composite cost indicator reflecting key cost drivers affecting prices in Lebanon, including exchange rate movements, fuel prices, and import costs.

Periodically reviewed price bands would allow prices to adjust while moderating excessive increases, improving transparency, and reducing price volatility for consumers and businesses.

Both measures require reliable market data, sufficient institutional capacity within the MoET to monitor prices and engage retailers, and transparent methodologies for updating price bands. Poorly calibrated margins or weak enforcement could create unintended consequences, including supply shortages, reduced product availability, or the expansion of informal markets. These mechanisms should therefore be designed as flexible, regularly reviewed tools rather than rigid price controls.

While other middle-income countries, including Egypt, Jordan, and Tunisia, have adopted temporary price stabilization, market-monitoring initiatives, or commodity-specific interventions during periods of economic stress, these differ substantially from the bounded basket and index-based price banding mechanisms proposed here. The French initiative therefore provides the closest policy analogue.

Although these measures cannot substitute for broader economic and structural reforms, together they could provide a more structured framework for moderating price volatility and protecting household purchasing power in the short to medium term.

Why Is This Important?

The persistence of high living costs is forcing households to rely on short-term coping strategies, including reducing essential consumption. LCPS findings indicate that 38.2% of respondents report reducing spending on essentials such as food, clothing, etc.

As inflation becomes increasingly structural rather than temporary, essential expenditures absorb a growing share of household income, deepening vulnerability and widening inequalities. In this context, existing policy responses—centered on monitoring and enforcement—are insufficient to address the underlying dynamics shaping price formation.

Without more structured mechanisms to manage essential goods prices, the cost-of-living crisis risks becoming further entrenched, limiting recovery prospects and reinforcing long-term socioeconomic strain.

References

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French Ministry of Economy and Finance. “Trimestre Anti-Inflation: Des Produits à Prix Abordables pour les Français.” Ministère de l’Économie, des Finances et de la Souveraineté Industrielle et Numérique, 2023, https://www.economie.gouv.fr/trimestre-anti-inflation-produits-prix-abordables-francais.

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