M1 Increases to $ 23.48B by November 05, 2020 Driven by Higher Currency in Circulation

BDL’s latest statistics on money supply revealed that Broad Money (M3) increased by a weekly LBP 306B ($203M) in the week ending November 05, 2020 to stand at LBP 197,519B ($131M). However, on annual basis, M3 decreased by 5.09% and 2.45% since year-start (YTD).

In details, M1 expanded by a weekly LBP 791B ($525M) to settle at LBP 35,393B ($23.48M) by November 05, 2020. The uptick is mainly attributed to increase in Currency in circulation by a weekly LBP 1,052B ($698M) and a decrease in demand deposits by LBP 261B ($173M).

 In turn, total deposits (excluding Demand deposits) decreased by LBP 485.14B ($322M), owing to a weekly decrease in deposits denominated in foreign currencies by USD 289M. Meanwhile, Terms and saving deposits in LBP witnessed a weekly drop by LBP 49B ($33M).

As such, the rate of broad money dollarization declined as it went from 67.95% in the week ending October 29 to 67.63% in the week ending November 05, 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 November 05, 2020, the Ministry of Finance (MoF) raised LBP 477.92B ($317M) through the issuance of T-Bills maturing in 6 months (6M) and notes maturing in 3 year (3Y) and 7 year (7Y). The highest demand was recorded on the 7Y notes which grasped 54.53% of total subscriptions, while 3Y notes and the 6M T-bills accounted for the remaining shares of 43.31% and 2.15%, respectively. In details, the yield on 6M stood at 4% while coupon rate on the 3Y and 7Y stood at 5.50%, and 6.50% respectively.

Source: BDL; MoF


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