Balance of Payments Captures BDL’s Swap Effect, $331.9M in Surplus by November 2016

Lebanon’s Balance of Payments (BoP) recorded a surplus of $331.9M by Nov.2016 compared to a $2.98B deficit by Nov. 2015. The surplus is mainly an indirect result of the Swap Operation coordinated by BDL in June 2016, knowing the BOP deficit by June stood at $1,773.7M.

The Swap mainly consisted of commercial banks buying Eurobonds from the central bank and depositing dollars; in exchange, BDL purchased banks’ holding of T-Bills at a premium, comprising part of the remaining coupons on these bills. In order to boost their participation in the Swap operation, commercial banks attempted to attract fresh money into the country. Hence, banks sold a portion of their Eurobonds portfolio to foreign institutions, borrowed some money from their correspondent banks, and mounted products related to the Swap targeting their largest non-resident depositors, or other depositors able to bring money from abroad, while offering them attractive yields. Commercial banks then placed the collected dollars at the central bank. As a result, Net Foreign Assets (NFAs) of BDL surged by $4.1B by November 2016, while commercial banks’ NFAs shrank by $3.77B.

The BOP in November alone registered a surplus of $457.2M compared to a deficit of $815.7M in Nov.2015. BDL Foreign Assets in the same month increased by $106.3M and NFAs of commercial banks recovered, advancing to $350.9M.

BOP and Net Foreign Asset Balances By November (in millions of $)

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Source: Banque Du Liban

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