According to balance sheet of Banque du Liban BDL, the central bank’s total assets continue to grow and added 9.80% sine year-start to reach $155.21B in October 2020. This increase is due to the rise of gold price by 23.95% since year to date to reach $1,877.95 per ounce, by October 2020, as BDL gold reserve compose 11.14% of total asset, and recorded an increase of 24.01% to reach $17.28B in October 2020. In addition, “Other assets” rose by 83.35% since year to date, to reach $45.76B. However, this account has raised doubts about the accuracy of BDL financial position, since its components are not well known and whether they constitute loss or profit.
It became obvious that the resigned government won’t take any unpopular decision in relation to subsidies on basic goods, preferring to throw this fireball decision to the potential new government. Further, the foreign asset continued to suffer and has recorded a drop by 31.75% since year to date to reach $25.43B in October 2020. Meanwhile, IMF recently urged Lebanon to revamp its subsidy system so that the people who are most in need can be reached more efficiently.
On the liabilities front, as the confidence on banking sector has been shaken, depositors continued to withdraw their deposits, which caused a further reduction in “financial sector deposits” (69.92% of BDL’s total liabilities) by 3.11% YTD to settle at $108.53B in October 2020.Meanwhile, as BDL governor “Riad Salame” called on banks to limit their withdrawals based on the size of accounts they have at BDL, this measure is likely to limit or control indirectly the fluctuations of the price of dollars in the black market. In addition “Currency in circulation outside BDL” rose by 142.07% since year to date to reach $16.96B in October 2020. This expansion is explained by the fear of depositors that there money could be stuck in the banking sector as Lebanon has transformed to a cash economy, with “only cash accepted” is becoming the new trend to most of Lebanese traders.
BDL Currency in Circulation, Total and Foreign Assets in October (in $B)