BDL Foreign Assets Continue to Drain amid the Subsidizing of the Essential Goods

According to the balance sheet of Banque du Liban (BDL), the central bank’s total assets added 4.73% compared to last year, to reach $148.68B by the mid-January 2021. The increase was mainly due to the 19% rise in gold compared to last year to $1,846.85/ounce in the mid-January 2021. As a result the “gold” account (composing 11.51% of BDL’s total assets) increased by 19.50% to $17.11B. In addition, “Other assets” (grasping 27.79% of BDL’s total assets) rose by 61.90% year-on-year (YOY), to reach $41.32B. In fact, this account is still raising doubts about the accuracy of BDL’s financial position, as it might be used to disguise losses on loans to the government and other operations.

BDL’s foreign assets (grasping 15.96% of total assets) decreased by 35.80% YOY to stand at $23.73B in mid-January 2021. In details, this account mainly includes Eurobonds held by BDL, loans to commercial banks and reserves that BDL possesses with foreign correspondents. In fact this account doesn’t reflect the real situation. In details, Eurobonds are estimated to be $5B, however those Eurobonds are currently trading on average at 15 cent per dollar, which raises questions about the real value of Eurobonds on BDL’s balance sheet.

On the liabilities front, financial sector deposits (72.35% of BDL’s total liabilities) recorded a downtick of 4.67% YOY to settle at $107.57B in mid-January 2021 of which around more than two thirds are denominated in dollars. It’s worth mentioning that the available liquidity of BDL is estimated to be $17.5B and is used until now in subsidizing the essential goods.

 Looking at Currency in Circulation outside of BDL (14.45% of BDL’s total liabilities) it increased from $7B mid-January 2020 to $21.48B in mid-January 2021.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 rate of LBP/USD 3,900.

BDL Total, foreign assets and currency in circulation in mid-January ($B)

BDL Foreign Assets Continue to Drain amid the Subsidizing of the Essential Goods

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