Financial inflows to Lebanon in the first 10 months of 2016 jumped by 30.7 percent to $13 billion compared to the same period of last year, driven mainly by an increase in customer deposits, a report by Bank Audi said.
A banker told The Daily Star that the increase in customer deposits was basically triggered by the financial engineering of the Central Bank that was aimed at boosting the foreign currency reserves of BDL as well as the profitability of the lenders.
“Customer deposits in the first 10 months rose by 24 percent to $6.1 billion. Furthermore, the deposits of non-resident Lebanese banks went up by 4 percent to $2.68 billion in the same period,” the banker explained.
The Central Bank financial engineering resulted in an increase in the BDL’s foreign assets including gold to $52.2 billion in September, from $46.7 billion in April before the operation began.
“In turn, this increased the commercial banks’ liquidity in Lebanese pound which can be used for local financing, while it cut their U.S. dollar liquidity which would have been used internationally instead. The BDL purchased the T-bills at a 3.5 percent premium, we estimate, which in turn resulted in a handsome profit for the commercial banks. They were required to set these profits aside as Lebanese pound denominated reserves ahead of the implementation of IFRS 9 in 2018,” according to Dubai based company Arqaam Capital.
Bank Audi said that the financial inflow increase has offset the 8.5 percent increase in trade deficit.
This has led to a small deficit in the balance of payments of $125 million, compared to a deficit of $2.2 billion in the corresponding period of 2015.
“While inflows rose from $10 billion over the first 10 months of 2015 to $13.1 billion over the 2016 same period, the trade deficit actually rose from $12.2 billion to $13.2 billion driven by a 7 percent rise in imports and a 0.4 percent decline in exports between the two periods. Accordingly, the sum of exports and imports picked up by 6 percent, to reach $18.2 billion during the first nine months of 2016,” Bank Audi said.
The report added that the exports to imports ratio fell from 17 percent in the first 10 months of 2015 to 15.8 percent in the same period of 2016.
“The breakdown of exports by category suggests that the most significant decline was reported at the level of chemical products with 26.6 percent, followed by metals and metal products with 25.8 percent, textiles and textile products with 21.3 percent, electrical equipment and products with 20.7 percent and paper and paper products with 20 percent,” Audi Bank report stated.
It added that exports of jewelry reported a 91.3 percent growth year-on-year, followed by fats and oils with 10.7 percent and plastic products with 1.8 percent year-on-year over the first 10 months of 2016 relative to the 2015 corresponding period.
