Money Supply M1, inclusive of Money in Circulation, Added $370M by Feb. 27th 2020

BDL’s data on money supply revealed that Broad Money (M3) declined by LBP 110B ($73M) in the week ending February 27th 2020 to settle at LBP 196,934B ($131B), thereby registering an annual decrease of 6.58% and a year-to-date (YTD) down tick of 2.74%.

In details, money supply M1, which entails Currency in circulation and Demand deposits in LBP, expanded by LBP 558B ($370M) over the same week, reaching LBP 10,522B ($6.9B). In fact, this parameter has gained traction in the past few months as people’s preferences shifted towards the use of Cash over any other method of payment. With capital controls imposed since November 2019, confidence in the banking sector softened amid the high uncertainty as banks also set limits on card payments and transfers. In fact, the increase in M1 came on the back of a LBP 182B ($121M) increase in Currency in circulation and an LBP 376B ($249M) in Demand deposits.

In their turn, Total deposits (excluding demand deposits) fell by LBP 668.6B ($443M). In fact, Term and saving deposits in LBP dropped by LBP 771B ($511M) while Deposits denominated in foreign currencies rose by $68M.

As such, the rate of broad money dollarization continued its marginal rise, going from 69.66% in the week ending February 20th to 69.76% in the week ending February 27th.

In its treasury bills (T-Bills) auction dating February 27, 2020, the Ministry of Finance raised LBP 176B ($116.75M) through the issuance of T-bills maturing in 6month (6M) and notes maturing in 3 Years (3Y). and 7Y. The highest demand was realized on notes maturing in 7Y, as they composed 61.74% of the total subscriptions, while the 3Y notes and 6M bills accounted for the remaining shares of 34.11% and 3.95%, respectively. In details, the yields on the 6M bills stood at 5.85%, while the coupon rate on the 3Y notes and 7Y notes stood at 7.50% and 9%, respectively.

Source: Banque du Liban (BDL), Ministry of Finance

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