| (Thousands of Lebanese Pounds ) | 15/07/2023 | 30/06/2023 |
| Assets | ||
| Gold * | 270,623,623,530 | 266,191,366,095 |
| Foreign Assets | 215,947,005,097 | 214,580,840,530 |
| Securities Portfolio | 65,863,214,548 | 65,968,189,258 |
| Loans to Public Sector | 249,474,479,444 | 249,275,788,457 |
| Loans to Local Financial Sector | 16,051,537,777 | 16,123,515,468 |
| Re-Valuation Adjustment (Articles 75 & 115 of C.M.C.) | 644,043,677,587 | 633,796,176,414 |
| Assets From Exchange Operations Of Financial Instruments | 18,080,639,845 | 18,080,639,845 |
| Other Assets * * | 100,421,500,670 | 102,576,132,627 |
| Fixed Assets | 498,856,248 | 492,641,770 |
| Total Assets | 1,581,004,534,746 | 1,567,085,290,464 |
BDL’s balance sheet (published bi-weekly) has seen notable changes throughout the crisis, especially on the assets side. The item that was most interesting up to end January 2023, when the official exchange rate was still set at 1,507 LBP, was Other Assets which BDL indicated they include open market operations and seigniorage. In fact, they included BDL losses from such transactions and FX loans to the government, and they were recorded as assets since BDL could recoup them all as revenue in the future. Their value at 31/1/2023 was 142.4 trillion LBP.
However, starting 1 February, 2023, BDL split the Other Assets item into three: Other Assets, Valuation Adjustment, and FX Loans to the Public Sector. That was a more explanatory division, especially in regards of loans to the government. All items started then to be evaluated at the new official exchange rate of 15,000 LBP, ant on 15/2/2023, they stood at: Other Assets at 147 trillion LBP, Valuation Adjustment (VA) at 548.2 trillion LBP, and FX Loans to the Public Sector at 247.6 trillion LBP. As such, in our view, the Valuation Adjustment contains the bulk of BDL losses, primarily from subsidies and EDL transfers, and satisfies the identity: Assets (minus VA) + VA = Liabilities + Capital Account, or it roughly equates to BDL’s negative equity.
At end May, 2023, BDL instituted a new change to its assets side. It introduced instead of VA, the new item Revaluation Adjustment, and BDL explained it includes “a special account called ‘Exchange Stabilization Fund’ in accordance with Article 75 of the Code of Money and Credit per Central Council decision number 1/14/23”. We think that this shifted the cost of Sayrafa from Other Assets to the new Revaluation Adjustment. Before we show that, note that at 31/5/2023 Revaluation Adjustment increased to 615.5 trillion LBP and Other Assets fell to 102.3 trillion LBP.
To show that the cost of Sayarfa moved from Other Assets to Re-Valuation Adjustment, we will work with the table above depicting the asset side of BDL’s balance sheet in the first two weeks of July 2023 (the latest blance sheet). As we see, the Revaluation Adjustment item increased by 10.2 trillion LBP from 633.8 trillion LBP to 644 trillion LBP. But the interesting thing is that Sayrafa transactions reached to $1.5 billion during these two weeks; and given that BDL sold them at the rate of 85,500 LBP per USD, and then rebought them from the market at the (average) rate of 91,500, this implies that BDL lost 6,000 LBP per USD transacted, or a total of 9 trillion LBP. And this pretty much captures most of the increase in the Revaluation Adjustment item of 10.2 trillion LBP.
It seems that Central Bank balance sheet is not a science; it is more like an art, and an ‘art of expediency’. Perhaps nowhere is this better illustrated than in the case of BDL!