BDL Foreign Assets continue its yearly Contraction at 36.80% Reaching $21.91B by Mid-April 2021

According to the balance sheet of Banque du Liban (BDL), the central bank’s total assets added 4.04% compared to last year, to reach $153.7B by mid-April 2021. Reasons behind the increase include the 2.77% rise in gold price compared to last year to reach $1,763.2/ounce by mid-April 2021. As a result, the “gold” account, composing 10.49% of BDL’s total assets, increased by 2.05% to $15.79B. In addition, “Other assets”, grasping 31.55% of BDL’s total assets, rose by 52.35% year-on-year (YOY), to reach $48.50B.

BDL’s foreign assets (grasping 14.26% of total assets) decreased by 36.80% YOY to stand at $21.91B by mid-April 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. Specifically, 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 (69.92% of BDL’s total liabilities) recorded a downtick of 4.50% YOY to settle at $107.47B by mid-April 2021, of which more than two thirds are denominated in dollars.

Looking at Currency in Circulation outside of BDL (16.19% of BDL’s total liabilities) it increased from $10.06B in mid-April 2020 to $24.89B in mid-April 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.

Interesting to note that with the expected record contraction of the Lebanese economy in 2021, the IMF expects that the rate of inflation in Lebanon will reach very high levels, along with the continued deterioration of monetary conditions and marked disparity between the official exchange rate of the US dollar and the prevailing exchange rate in the parallel market, and the decline in public revenues. Moreover, caretaker finance minister, Ghazi Wazni, said that Lebanon is running out of money to fund basic imports by the end of May and delays in launching a plan to reduce subsidies is costing $500 million a month and draining in foreign reserves at BDL.

 BDL Total, Foreign assets and currency in circulation as of Mid-April ($B)

BDL Foreign Assets continue its yearly Contraction at 36.80% Reaching $21.91B by Mid-April 2021

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