According to BDL’s latest monetary report, the BOP recorded a cumulative deficit of $2,366.2M by August 2021, compared to a deficit of $7,500.7M over the same period last year. Accordingly, Net foreign Assets (NFAs) of BDL fell by $4,433.3M, while the NFAs of commercial banks added $2,077.1M for August 2021.
On a monthly basis, the NFAs of commercial banks recorded a deficit of $103.7M for the first time since April 2021.
For a meaningful analysis, we examine the NFAs of commercial banks. For the month of August, the decline in foreign assets can be largely attributed to the monthly reduction in the “Claims on non-resident customers”, which dropped by 3.01% to $2.43B. Furthermore, “Claim on non-resident financial sector” has jumped by $419M to $5.12B. This increase is most likely linked to the sales agreement between Blom Egypt and “Bahrain Bank ABC”, as BLOM sold its Egypt subsidiary for $427 million. The majority of the amount ($419M) was allocated to a foreign correspondent bank in order to reinforce the positon of Blom Bank and increase its liquidity, which increased the Claim on non-resident financial sector in the consolidated balance sheet of commercial banks. As for “non-other foreign assets” it decreased by 9.97% to $3.27B by August 2021.
Foreign liabilities mainly decreased following the decrease in “non-resident customers deposits” by 0.32% to $24.10B and the decrease in “non-resident financial sector liabilities” by 0.99% to $5.26B.
On a related note, BDL issued Circular 158 in June 2021 which provides binding instructions to banks to pay back gradually their customers’ foreign currency deposits. This circular will likely decrease gradually the foreign assets of the commercial banks. In addition, BDL has recently granted the application of both circulars 151 and 158 for each customer but for accounts held at different banks. Moreover, this arrangement could be considered as compensation for not raising the exchange rate above 3,900 LBP in circular 151.
Balance of Payments (BoP) by August (in $M)