M3 reached $132B By February 4, 2021

BDL’s latest statistics on money supply revealed that Broad Money (M3) decreased slightly by LBP 582B ($386M) to stand at LBP 200,523B ($133.02B) by the week ending February 4, 2021. As such, on an annual basis, M3 increased by 0.52% Year over year and by 0.64% since year-start (YTD).

In details, M1 expanded by a weekly LBP 735B ($488M) to settle at LBP 42,743B ($28.35B) by February 4, 2021. The upsurge is mainly attributed to the increase in Currency in circulation of LBP 777B ($515.42M) noting that demand deposits went down by LBP 42B ($27.86M) over the same period.

In turn, total deposits (excluding Demand deposits) decreased by LBP 153.18B ($101.61M), owing to a decline in deposits denominated in foreign currencies by $84M. In addition, Terms and saving deposits in LBP witnessed a drop by LBP 26B ($17.24M).

As such, the rate of broad money dollarization slightly regressed from 65.5% in the week ending January 28, 2021 to 65.25% in the week ending February 4, 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 2.64% and 0.94%, respectively, in December 2020. As for the average lending rate in LBP, it went down from 9.09% in December 2019 to 7.77% in December 2020, while the average lending rate in USD declined from 10.84% in December 2019 to 6.73% in December 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 December 2020, M3 stood at $132.70B, 1.37% less than year-start (YTD); NFA were $17.93B, less 32.57% YTD; CPS was $34.47B, less by 26.62%; NCPS was $39.07B, less by 17.40%; and OIN were $41.23B, higher by 171.66%, 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 February 4, 2021, the Ministry of Finance (MoF) raised LBP 531.40B ($352.51M) through the issuance of T-Bills maturing in 3 months (3M) and notes maturing 5 years (5Y). The highest demand was recorded on the 5Y notes which grasped 99.06% of total subscriptions, while 3M T-bills accounted for the remaining shares of 0.94%. In details, the yield on 3M T-bills stood at 3.5%, while coupon rates on the 5Y notes stood at 6%.

Source: BDL; MoF

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