BDL Foreign Assets continue its Contraction Reaching $22.15B End of March 2021

According to the balance sheet of Banque du Liban (BDL), the central bank’s total assets added 4.06% compared to last year, to reach $152.22B by end of March 2021. The increase was mainly due to the 8.65% rise in gold price compared to last year to reach $1,707/ounce end of March 2021. As a result, the “gold” account, composing 10.21% of BDL’s total assets, increased by 4.88% to $15.54B. In addition, “Other assets”, grasping 31.11% of BDL’s total assets, rose by 53.79% year-on-year (YOY), to reach $47.36B.

BDL’s foreign assets (grasping 14.55% of total assets) decreased by 37.12% YOY to stand at $22.15B by end of March 2021. In details, this account mainly includes Eurobonds held by BDL, and reserves that BDL possesses with foreign correspondents and other short-term instruments. In fact, this account doesn’t totally reflect the real situation. For instance, Eurobonds are estimated to be $5.03B, however those Eurobonds are currently trading on average at 15 percent per dollar, which raises questions about the real value of Eurobonds on BDL’s balance sheet.

On the liabilities front, Financial sector deposits (71.05% of BDL’s total liabilities) recorded a downtick of 4.36% YOY to settle at $108.15B by end of March 2021, of which more than two thirds are denominated in dollars.

Looking at Currency in Circulation outside of BDL (15.91% of BDL’s total liabilities) it increased from $9.58B in March 2020 to $24.21B in March 2021. In fact, depositor’s preference for cash is growing amid the uncertainty and lack of trust in the economy. In addition, BDL’s circular 151 facilitated cash withdrawals at the rate of 3,900 LBP per USD, which in turn supported the uptrend in the circulated currency and impacted the value of the Lebanese pound.

It is worth mentioning that the central bank has around $16 to $17 billion left in foreign reserves, of which only $1 billion to $1.5 billion can be used to fund subsidies, enough for two to three months, according to Finance Minister Ghazi Wazni’s interview with Bloomberg. Moreover, Lebanon cannot continue to subsidies the necessity goods at the same pace and will gradually be raising gasoline prices to save the declining foreign reserves.

 BDL Total, Foreign assets and currency in circulation as of March ($B)

BDL Foreign Assets continue its Contraction Reaching $22.15B End of March 2021

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