BDL’s latest statistics on money supply revealed that Broad Money (M3) increased by a weekly LBP 976B ($648M) in the week ending October 29, 2020 to stand at LBP 197,213B ($130.82B). However, on annual basis, M3 decreased by 5.47% and 2.60% since year-start (YTD).
In details, M1 expanded by a weekly LBP 836B ($554M) to settle at LBP 34,601B ($22.95B) by October 29, 2020. The uptick is mainly attributed to increase in Currency in circulation and in demand deposits by LBP 609B ($404M) and LBP 227B ($150.58M), respectively.
In turn, total deposits (excluding Demand deposits) increased by LBP 140.26B ($93M), owing to a weekly increase in deposits denominated in foreign currencies by USD 174M. Meanwhile, Terms and saving deposits in LBP witnessed a weekly drop by LBP 122B ($80.93M).
As such, the rate of broad money dollarization declined, as it went from 68.16% in the week ending October 22, to 67.95% in the week ending October 29, 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 September 2020, M3 stood at $130.92B, less by 2.69% from year-start (YTD); NFA was $18.91B, less 28.86%; CPS was $36.87B, less by 21.52%; NCPS was $40.24B, less by 14.9%; and OIN was $34.9B, higher by 103.4%, 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