BDL’s latest statistics on money supply revealed that Broad Money (M3) increased by LBP 274B ($182M) over a 3-week period ending January 28, 2021 to stand at LBP 199,941B ($132.63B). As such, on an annual basis, M3 decreased by 0.09% and increased by 0.35% since year-start (YTD).
In details, M1 expanded over the period of 3 weeks by LBP 1,095B ($726M) to settle at LBP 42,008B ($27.87B) by January 28, 2021. The upsurge is mainly attributed to the increase in Currency in circulation and demand deposits by LBP 508B ($336.9M) and by LBP 586B ($388.7M) over the same period.
In turn, total deposits (excluding Demand deposits) decreased by LBP 820.90B ($544.55M), owing to a decline in deposits denominated in foreign currencies by $348M. In addition, Terms and saving deposits in LBP witnessed a drop by LBP 296B ($196.34M).
As such, the rate of broad money dollarization dropped from 65.86% in the week ending January 07, 2021 to 65.51% in the week ending January 28, 2021.
Looking at interest rates, the average rate on deposits in LBP and in USD, at commercial banks, decreased from 7.36% and 4.62% in December 2019 to 2.91% and 0.97%, respectively, in November 2020. As for the average lending rate in LBP, it went down from 9.09% in December 2019 to 7.92% in November 2020, while the average lending rate in USD declined from 10.89% in December 2019 to 6.63% in November 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 November 2020, M3 stood at $131.9B, 1.95% less than year-start (YTD); NFA were $17.3B, less 34.91% YTD; CPS was $35.6B, less by 27.84%; NCPS was $40.3B, less by 14.86%; and OIN were $38.7B, higher by 155.36%, 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 January 14, 2021 (latest available), the Ministry of Finance (MoF) raised LBP 141.33B ($93.75M) through the issuance of T-Bills maturing in 6 months (6M) and notes maturing in 2 years (2Y) and in 10 years (10Y). The highest demand was recorded on the 10Y notes which grasped 81.75% of total subscriptions, while 2Y notes and 6M T-bills accounted for the remaining shares of 14.15% and 4.10%, respectively. In details, the yield on 6M T-bills stood at 4% while coupon rates on the 2Y and 10y notes stood at 5.06% and 7%, respectively.
Source: BDL; MoF