M1 Increases to $ 22.4B by October 22, 2020 Driven by Higher Currency in Circulation

BDL’s latest statistics on money supply revealed that Broad Money (M3) decreased by a weekly LBP 132B ($87M) in the week ending October 22, 2020 to stand at LBP 196,237B ($130.17B), leading to an annual decrease of 6.01% and a 3.09% decline since year-start (YTD).

In details, M1 expanded by a weekly LBP 205B ($136M) to settle at LBP 33,765B ($22.40B) by October 22, 2020. The uptick is mainly attributed to increase in Currency in circulation by LBP 230B ($152.6M) Further, the demand of deposits decreased by LBP 25B ($16.58M).

 In turn, total deposits (excluding Demand deposits) decreased by LBP 336.72B ($223M), owing to a weekly drops in Term and savings deposits and in Deposits denominated in foreign currencies by LBP 89B ($59M) and USD 164M, respectively.

As such, the rate of broad money dollarization declined, as it went from 68.24% in the week ending October 15, to 68.16% in the week ending October 22, 2020.

Analytically, the money supply M3 can be derived from combining the balance sheet of BDL with the balance sheet of banks to arrive at the monetary survey of the banking system. The resulting M3 would be equal to the sum of: net foreign assets (NFA), credit to the private sector (CPS), net credit to the public sector (NCPS), and other items net (OIN). Latest data show that in August 2020, M3 stood at $130.6B, less by 2.9% from year-start (YTD); NFA was $21.8B, less 18.2%; CPS was $37.9B, less by 19.3%; NCPS was $40.1B, less by 15.3%; and OIN was $30.8B, higher by 103.1%, and comprising mostly (in BDL’s terminology) other assets which include open market operations and seigniorage, considered to be a controversial account by some.

In its treasury bills (T-Bills) auction dating October 22, 2020, the Ministry of Finance (MoF) raised LBP 192.05B ($127.39M) through the issuance of T-Bills maturing in 6 months (6M) and notes maturing in 2 year (2Y) and 10 year (10Y). The highest demand was recorded on the 2Y notes which grasped 59.88% of total subscriptions, while 10Y notes and the 6M T-bills accounted for the remaining shares of 34.98% and 5.14%, respectively. In details, the yield on 6M stood at 4% while coupon rate on the 2Y and 10Y stood at 5%, and 7% respectively.

Source: BDL; MoF


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