Money Aggregates in the Last Three Years: M1

Money supply is the sum of money in circulation, being cash, coins, treasury bills and bank accounts balances. Money supply is divided into four categories: M1, M2, M3, and M4.

M1 = Currency in Circulation + Demand Deposits in LBP.

M2 = M1 + Other Deposits in LBP = Currency in Circulation + Demand Deposits in LBP + Other Deposits in LBP

M3 = M2 + Deposits in Foreign Currency = Currency in Circulation + Demand Deposits in LBP + Other Deposits in LBP + Deposits in Foreign Currency

M4 = M3 + Treasury Bills held by non-banking system including accrued interests = Currency in Circulation + Demand Deposits in LBP + Other Deposits in LBP + Deposits in Foreign Currency + Treasury Bills held by non-banking system including accrued interests.

In this Economic Digest, we will be tackling M1 from June 2021 to September 2024. It is to be noted that BDL Basic Circular 161 released on December 16th, 2021, which primarily deals with the initiation of Sayrafa platform.

As the formula shows, M1 is sum of currency in circulation and demand deposits. The below graph shows the change of M1 between June 2021 till September 2024.

Sources: M1 from ABL Key Indicators, Currency in Circulation from BDL Balance Sheets

As shown in the above graph, several findings can be derived:

1. M1 increased from LBP 51,266 bn in June 2021 to reach a maximum of LBP 115,873 bn in June 2023 and then decrease to LBP 85,890 bn in September 2024; compared to LBP 11,692 bn in September 2019.
2. Currency in circulation increased from LBP 40,340 in June 2021 to reach a maximum of LBP 83,289 bn in February 2023 and then decreased to record LBP 53,463 bn in September 2024; compared to LBP 6,474 bn in September 2019.
3. LBP demand deposits increased from LBP 10,926 bn in June 2021 to reach a maximum of LBP 34,670 bn in June 2023 and then recorded LBP 32,427 bn in September 2024; compared to LBP 5,218 bn in September 2019.
4. The currency in circulation was the main variable in M1, dominating the fluctuation in M1.
5. In April 2023, the caretaker government increased the public sector salaries which most probably led the increase in currency circulation as BDL was purchasing US dollars from parallel market to pay public sector wages in USD.
6. LBP demand deposits are increasing since August 2023 due to the stabilization of LBP/USD exchange rate after the acting governor took the reign of BDL.

We will explore the variations in M2 and M3 in the upcoming economic digests.

Disclaimer :

This article is a research document that is owned and published by Blominvest Bank SAL.

No material from this publication may be modified, copied, reproduced, repackaged, republished, circulated, transmitted or redistributed directly or indirectly, in whole or in any part, without the prior written authorization of Blominvest Bank SAL.

The information and opinions contained in this document have been compiled from or arrived at in good faith from sources deemed reliable. Neither Blominvest Bank SAL, nor any of its subsidiaries or affiliates or parent company will make any representation or warranty to the accuracy or completeness of the information contained herein.

Neither the information nor any opinion expressed in this research article constitutes an offer or a recommendation to buy or sell any assets or securities, or to provide investment advice.

This research article is prepared for general circulation and is circulated for general information only.