BDL’s latest statistics on money supply revealed that Broad Money (M3) increased slightly by LBP 566B ($376M) to stand at LBP 201,815B ($133.87B) by the week ending February 25, 2021. As such, on an annual basis, M3 increased by 2.10% Year over year and by 1.29% since year-start (YTD).
In details, M1 expanded by a weekly LBP 751B ($498M) to settle at LBP 44,506B ($29.52B) by February 25, 2021. The upsurge is mainly attributed to the increase in Currency in circulation and in demand deposits by of LBP 291B ($193.03M) and LBP 460B ($305.14M) over the same period.
In turn, total deposits (excluding Demand deposits) decreased by LBP 184.65B ($122.48M), owing to a decrease in deposits denominated in foreign currencies by $35M. In addition, Terms and saving deposits in LBP witnessed a drop by LBP 132B ($87.56M).
As such, the rate of broad money dollarization slightly regressed from 64.97% in the week ending February 18, 2021 to 64.79% in the week ending February 25, 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 by 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 25, 2021, the Ministry of Finance (MoF) raised LBP 263.925B ($175.07M) through the issuance of T-Bills maturing in 6 months (6M) and notes maturing in 3 years (3Y) and 7 years (7Y). The highest demand was recorded on the 3Y notes which grasped 49.25% of total subscriptions, while 7Y notes and 6M T-Bills accounted for the remaining shares of 44.42% and 6.33%, respectively. In details, the yields on 6M T-Bills stood at 4% while coupon rate on the 3Y and 7Y notes stood at 5.58% and 6.5%, respectively.
Source: BDL; MoF