According to BDL’s latest monetary report, the BOP recorded a cumulative deficit of $9.61B by September 2020, compared to a deficit of $5.95B by September last year. Accordingly, Net foreign Assets (NFAs) of BDL fell by $11.96B. Meanwhile the NFAs of commercial banks added $2.35B over the same period.
On a monthly basis, the BOP deficit stood at $2.11B, as NFAs of BDL fell by $2.53B and that of Commercial banks rose by $424.2M.
For a meaningful analysis, we examine the NFAs of commercial banks which are in fact the difference between banks’ Foreign Assets (FA) and Foreign Liabilities (FL). For the month of September, the decline in FLs can be largely attributed to the reduction in the “Non-resident customer deposits” and “Non-resident Financial sector Liabilities” by $320.72M and $44.05M, respectively. Further, on the Foreign asset side, “Currency and deposits with other central banks-NR”, and “Claims on Non-resident Financial sector” rose by $74.49B and $78.88B, respectively. However, “Claims on Non-resident customer” and “Non-resident securities portfolio” decreased by $57.13B and $30.92B, respectively. The decline on “Non-resident securities portfolio” can be explained that most of Lebanese banks are willing to liquidate some of their foreign assets in order to raise capital; noting that BDL has obliged banks to raise their capital by the end of February 2021.
It is worth noting that the decline in BDL’s NFAs on a monthly basis is mostly attributed to the continued subsidization of essential imports (including basic food, medicines and fuel) in addition to paying back loans and/or deposits in foreign currency, leaving the central bank with less facilities to finance trade of basic commodities. And this burden is bound to increase given the absence of capital inflows that might shore up BDL’s foreign assets.
With no reforming plan, and with absence of an effective government, the deficit in BOP will likely continue to grow, which can have a disastrous results on Lebanese currency and the whole economic situation
Balance of Payments (BoP) by September (in $M)