Lebanon’s Monthly Balance of Payment in Surplus on July 2021 for the first Time since August 2019

According to BDL’s latest monetary report, the BOP recorded a cumulative deficit of $1,773.4M by July 2021, compared to a deficit of $5,532.6M over the same period last year. Accordingly, Net foreign Assets (NFAs) of BDL fell by $3,458.5M, while the NFAs of commercial banks added $2,108.8M for 2021.

On a monthly basis, and for the first time since August 2019, the balance of payment recorded a surplus of $38.7M on July 2021. Lebanon has suffered for a long time from a deficit on its balance of payments due to high volume of importations and other unreasonable spending.

For a meaningful analysis, we examine the NFAs of commercial banks. For the month of July, the decline in foreign liabilities can be largely attributed to the monthly reduction in the “Non-resident customer deposits”, which dropped to $26.1B. Foreign assets mainly increased following the increase in “Claims on non-resident customers” to $3.8B and the increase in claims on non-resident financial sector to $4.7B. As to the decline of NFAs of BDL, it is mainly attributed to the continued subsidization of essential goods; something that BDL has indicated would stop soon, mainly at the end of September 2021.

On a related note, BDL issued Circular 158 which provides binding instructions to banks to pay back gradually their customers’ foreign currency deposits. The circular applies to all accounts opened before 31/10/2019 and calculated based on the accounts as of 31/3/2021, on the condition that the accounts do not exceed those available at 31/10/2019. The accounts are also calculated after netting out all claims that the banks have against their customers. This circular will likely decrease gradually the foreign assets of the commercial banks; noting that circular 154 had obliged banks to increase their capital by 20% by February 2021.

Balance of Payments (BoP) by July (in $M)