As per the data published by the Association of Lebanese Banks’ (ABL), the total number of cleared checks in the Lebanese financial system slumped from 757,824 checks by January 2020 to 223,116 checks by January 2021. Moreover, the value of total cleared checks declined yearly by 66.40% to reach $2.25B by January 2021.
In details, the value of checks in LBP dropped by 64.92% year-on-year (YOY) to reach $800M, while value of checks in foreign currencies decreased by 67.16% YOY to reach $1.44B, in 2020.
The volumes of cleared checks denominated in Lebanese Pounds and foreign currencies witnessed significant yearly drops of 74.10% and 67.42% to settle at 92,306 checks and 130,810 checks, respectively by January 2021. One of the reasons for this drop is the decline in the real estate activity.
Accordingly, the dollarization of cleared checks in terms of value went down from last year’s 65.92% to 64.43% by January 2021. Meanwhile, the dollarization rate of checks in terms of volume rose from last year’s 52.97% to 58.63% by January 2021.
Notably, the number of returned checks fell by a substantial 91.03% YOY to 2,291 checks while the value of the returned checks retreated by 78.79% YOY over the same period to reach $32.50M by January 2021. This is a result of people dealing mostly with banker checks drawn on BDL and cannot be bounced back.
For more than a year, the economic situation has been deteriorating in Lebanon and banks have enforced informal capital control measures; depositors have been struggling with this tormenting reality and were ready to act on whatever means possible to save their money out of the banks. As a result, they came out with smart strategies that permitted them to squeeze out cash from their locked accounts. In other words, new market began to be seen by trading banker’s checks with cash dollars with the risk of losing up to 76% of their stuck money. By March 2020, a $100,000 banker check was worth $90,000 in cash but this risk is being gradually increasing as the dollar shortage is intensifying and dropped to $24,000 by March 2021.
Number & Value of Cleared Checks by January (in $B)
Source: ABL, BLOMINVEST