BDL’s latest statistics on money supply revealed that Broad Money (M3) significantly decreased by LBP 2,251B ($1,493M) to stand at LBP 194,048B ($128.72B) by the week ending February 17, 2022. As such, on an annual basis, M3 retreated by 4.02% year over year and by 2.61% since year-start (YTD).

In details, M1 dropped by LBP 1,933B ($1,282M) by a week to settle at LBP 53,163B ($35.27B) by February 17, 2022. The contraction is attributed to the decrease in currency in circulation by LBP 2,174B and increase in demand deposits by LBP 241B.

In turn, total deposits (excluding Demand deposits) decreased by $210.95M, owing to a decrease in Terms and saving deposits by LBP 114B ($75.62M). In the same token, deposits denominated in foreign currencies dropped by $135M.

As such, the rate of broad money dollarization increased from 61.465% in the week ending to February 10, 2022, 62.073% by the week ending February 17, 2022.

Looking at interest rates, the average rate on deposits in LBP and in USD, at commercial banks, decreased from 2.31% and 0.58% in January 2021 to 1.03% and 0.18%, respectively, in January 2022. In its turn, the average lending rate in LBP and USD, at commercial banks, went down from 8.53% and 6.52% in January 2021 to 6.4% and 6.15%, respectively, in January 2022.

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 January 2022, M3 stood at $130.67, 2.01% less than January 2021; NFA were $14.79B, less by 14.28% YOY; CPS was $26.29B, less by 22.84% YOY; NCPS was $32.59B, less by 18.16% annually; and OIN were $56.99B, higher by an annual 35.07%, 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 February 17, 2022, the Ministry of Finance (MoF) raised LBP 363.640B ($241.22M) through the issuance of T-Bills maturing in 3 months (3M) and 1 year (1Y), and notes maturing in 5 years (5Y). The highest demand was recorded on the 1 year T-Bills which grasped 91.07% of total subscriptions, while the 3M T-bills and 5Y notes accounted for the remaining shares of 4.89% and 4.04%, respectively. In details, the yield on 3M and 1Y T-bills stood at 3.50% and 4.50%, respectively while coupon on the 5Y notes stood at 6%.

Source: BDL; MoF