According to BDL’s latest monetary report, the BOP recorded a cumulative deficit of $2.105B by May 2022, compared to a deficit of $1.57B over the same period last year. Accordingly, Net foreign Assets (NFAs) of BDL fell by $2.06B, as BDL has continued to make some intervention on Fx market through the “Sayrafa” rate while the NFAs of commercial banks decreased by $40.2M by May 2022.
On a monthly basis, the BOP deficit stood at $402.3M; as NFAs of BDL fell by $285.8M while that of Commercial banks decreased by $116.5M.
For a meaningful analysis, we examine the NFAs of commercial banks. For the month of May, it was dominated by the decrease in foreign assets. On the liabilities side, “Non-resident financial sector liabilities” decreased by $47M, to reach $4.38B, while “Non-resident customers’ deposits” increased by $48.09M, to reach $24B by May 2022. On the asset side, however, “Claims on non-resident financial sector” plunged by $223M to reach $3.83B, while “Currency and deposits with other central banks-NR” has increased by $142M to reach $1.24B.
The deficit in the balance of payment is certainly driven by high outflow of foreign exchange needed to meet import demands as Lebanon had always held an unbalanced current account and went into continuous debt to pay for consumption instead of investing in future growth. However, reforming the external sector is a must for future growth as the current pattern of offsetting trade deficits with foreign inflows is unsustainable. Well-equilibrated BoP could be reached by first and foremost, reducing imports and improving exports, and regaining confidence so that Lebanon reclaim ability to attract financial and foreign investments.
Balance of Payments (BoP) by May (in $M)