Balance of Payments Deficit ended 2018 with a deficit of $4.82B

According to the Central Bank of Lebanon, Lebanon’s Balance of Payments (BoP) ended 2018 with a $4.82B deficit compared to a $155.7M deficit during the same period last year. In fact, the external balance was affected by the political uncertainties and difficult economic situation. In details, the NFAs of the Central Bank and commercial banks dropped by $2.29B and $2.53B respectively, over the same period.

In 2018, the Balance was mostly affected by the swap operation engineered in May 2018 between the Ministry of Finance (MoF), Banque du Liban (BDL), and commercial banks which sent the Lebanese Balance of payments (BOP) into a surplus totaling $448.7M by the end of May. In fact, the surplus was partly driven by the central bank’s new classification of its Eurobonds under “foreign assets” for the computation of the BOP. As a result, the $2.48B rise in the stock of Eurobonds at BDL led to a $2.16B increase in the central bank’s net foreign assets in May.

It is worthy to note that the largest deficits recorded in Lebanon’s BOP this year were in October and November 2018, whereby the BOP deficits stood at $1.81B and 959.9M, respectively.

In the month of December alone, the BOP recorded a deficit of 745.5M compared to a surplus of $853.8M in December 2017. In details, Central Bank’s NFAs dropped by $1.21B in 2018 while the commercial banks’ NFAs rose by $465.1M

Worth mentioning that if we adopt the IMF’s way of computing the Balance of Payments (BOP) by not including the Lebanese government Eurobonds held by BDL into its foreign assets, the BOP deficit becomes $7.32B[1] by the end of 2018. The Net Foreign Assets (NFA) of BDL and those of commercial banks would have slipped by $4.79B and $2.53B respectively.

Lebanon’s Balance of Payments by December (in millions of $)

bop

Source: BDL

 [1] This is according to the International Monetary Fund way of computing the BOP by not including Eurobonds held by BDL into its foreign assets. We estimated these Eurobonds to have increased by $2.5B in 2018.

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