BDL’s latest statistics on money supply revealed that Broad Money (M3) decreased slightly by LBP 553B ($367M) to stand at LBP 202,277B ($134.18B) by the week ending March 11, 2021. As such, on an annual basis, M3 increased by 2.65% Year over year and by 1.52% since year-start (YTD).
In details, M1 expanded by a weekly LBP 173B ($115M) to settle at LBP 46,007B ($30.52B) by March 11, 2021. The upsurge is mainly attributed to the increase in Currency in circulation by LBP 520B ($344.94M) and a decrease in demand deposits by LBP 347B ($230.18M) over the same period.
In turn, total deposits (excluding Demand deposits) decreased by LBP 725.96B ($481.56M), owing to a decrease in deposits denominated in foreign currencies by $294M. In addition, Terms and saving deposits in LBP witnessed a drop by LBP 282B ($187.06M).
As such, the rate of broad money dollarization slightly regressed from 64.41% in the week ending March 04, 2021 to 64.37% in the week ending March 11, 2021.
Looking at interest rates, the average rate on deposits in LBP and in USD, at commercial banks, decreased from 5.81% and 3.22% in February 2020 to 2.11% and 0.54%, respectively, in February 2021. As for the average lending rate in LBP, it went down from 9.33% in February 2020 to 7.59% in February 2021, while the average lending rate in USD declined from 9.11% in February 2020 to 6.92% in February 2021.
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 February 2021, M3 stood at $133.87B, 2.10% more than February 2020; NFA were $16.11, less by 40.75% YOY; CPS was $34.04B, less by 21.98% YOY; NCPS was $40.47B, less by 9.36% annually; and OIN were $43.97B, higher by an annual 159.10%, 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 March 11, 2021, the Ministry of Finance (MoF) raised LBP 223,014B ($147.93M) through the issuance of T-Bills maturing in 6 months (6M), and notes maturing in 2 years (2Y) and 10 years (10Y). The highest demand was recorded on the 10Y notes which grasped 54.94% of total subscriptions, followed by 44.84% for the 2Y notes while the 6M T-Bills held the remaining shares of 0.22%. In details, the yields on 6M T-Bills stood at 4%, while coupon rate on the 2Y and 10Y notes stood at 4.5% and 7%, respectively.
Source: BDL; MoF