According to the balance sheet of Banque du Liban (BDL), the central bank’s Total assets added 10.48% since year-start, to reach $156.17B in November 2020. The increase was mainly due to the 17.14% rise in gold prices since the start of the year to $1,777/ounce by November 2020. As a result the “Gold” account (composing 10.47% of BDL’s total assets) increased by 17.34% to $16.35B. In addition, “Other assets” (grasping 30.74% of BDL’s total assets) rose by 92.37% since year to date, to reach $48B. In fact, 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.
BDL’s foreign assets (grasping 16.03% of total assets) decreased by 32.84% year to date (YTD) to stand at $25B in November 2020. In details, this account includes mainly Eurobonds held by BDL ($5B), loans to commercial banks estimated at $6B and mostly banks’ required reserves. It is worth noting that the decline in BDL’s Foreign assets 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. Moreover, this burden is bound to increase given the absence of capital inflows that might shore up BDL’s foreign assets. As a result, there is serious talk now of limiting BDL subsidies to very essential goods only. Worth mentioning that BDL’s Governor Riad Salameh announced this week that BDL can continue to subsidy the essential good for two more months only.
On the liabilities front, Financial sector deposits (69.29% of BDL’s total liabilities) recorded a downtick of 3.40% YTD to settle at $108.21B in November 2020. Notably, Currency in Circulation outside of BDL (11.85% of BDL’s total liabilities) rose from $7B end-December 2019 to $18.5B in November 2020. This uptrend in circulated currency has been ongoing since the beginning of the year, as it continues to reflect clients’ strong preference for cash amid the growing uncertainty and feeble trust in the economy. In addition, BDL’s circulars No.148 and 151 further supported and facilitated cash withdrawals, as the circulars allowed depositors with foreign currency accounts to withdraw their savings in Lebanese lira at close to the market rate.
It’ worth mentioning that restructuring consultancy Alvarez & Marsal (A&M) confirmed on Thursday it had withdrawn from a forensic audit of Lebanon’s central bank as it had not received the information required to carry out the task. In fact, forensic audit is one of the conditions set by IMF in order to help Lebanon to exit his financial meltdown.
BDL Total, foreign assets and currency in circulation in November ($B)