M1 Increases to $ 24B by November 19, 2020 Driven by Higher Currency in Circulation

BDL’s latest statistics on money supply revealed that Broad Money (M3) decreased by a weekly LBP 91B ($60M) in the week ending November 19, 2020 to stand at LBP 197,383B ($130.93M). As such, on an annual basis, M3 decreased by 4.53% and 2.52% since year-start (YTD).

In details, M1 expanded by a weekly LBP 256B ($170M) to settle at LBP 36,218B ($24B) by November 19, 2020. The uptick is mainly attributed to the weekly increases in Currency in circulation and demand deposits by LBP 205B ($136M) and LBP 51B ($33.8M), respectively.

In turn, total deposits (excluding Demand deposits) decreased by LBP 346.59B ($229M), owing to a weekly decrease in deposits denominated in foreign currencies by USD 173M. In addition, Terms and saving deposits in LBP witnessed a weekly drop by LBP 86B ($57M).

As such, the rate of broad money dollarization declined as it went from 67.42% in the week ending November 12 to 67.32% in the week ending November 19, 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 19, 2020, the Ministry of Finance (MoF) raised LBP 77.1B ($51.1M) 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 10Y notes which grasped 70.73% of total subscriptions, while 2Y notes and 6M T-bills accounted for the remaining shares of 15.58% and 13.69%, respectively. In details, the yields on 6M stood at 4% while coupon rate on the 2Y and 10Y stood at 5% and 7%.

Source: BDL; MoF

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