As the economic situation has been deteriorating in Lebanon and banks have started enforcing illegal capital control measures, depositors were ready to act on whatever means possible to save their money out of the banks, mainly depending on issuing banker’s checks, and depositors rushed to buy property and invest in the real estate sector. However, in the last couple of months we observe that real estate developers have fastened down their supply and transactions have suffered as a result.
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 1,466,336 checks by February 2020 to 469,569 checks by February 2021. Moreover, the value of total cleared checks declined yearly by 60.55% to reach $4.94B by February 2021.
In details, the value of checks in LBP dropped by 53.20% year-on-year (YOY) to reach $2,107M, while value of checks in foreign currencies decreased by 64.68% YOY to reach $2,833M, by February 2021.
The volumes of cleared checks denominated in Lebanese Pounds and foreign currencies witnessed significant yearly drops of 69.47% and 66.62% to settle at 213,029 checks and 256,540 checks, respectively by February 2021. As mentioned, 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 64.05% to 57.35% by January 2021. In addition, the dollarization rate of checks in terms of volume rose from last year’s 52.41% to 54.63% by February 2021.
Notably, the number of returned checks fell by a substantial 88.78% YOY to 4,622 checks while the value of the returned checks retreated by 75.25% YOY over the same period to reach $66M by February 2021. This is a result of people dealing mostly with banker checks drawn on BDL and cannot be bounced back.
Value of Cleared Checks by Currency, by February (in $B)
Source: ABL, BLOMINVEST