For the month of February 2022, Lebanon experienced a steady appreciation the exchange rate in the parallel market to an average of LBP/USD 21,900. This was accompanied by the approval of a preliminary budget plan by the Council of Ministers in February. The budget plan is essential for Lebanese economy and is one of the requirements set by the International Monetary Fund to secure foreign financing. As mentioned in the budget plan, MOF proposes GDP growth to reach 3% for year 2022.
Accordingly, Lebanon’s monthly inflation rate registered a record high of 239.68% in January 2022 up from 147.55% in January 2021. In details, the cost of “Housing and utilities”, inclusive of water, electricity, gas and other fuels added a yearly 104.15% by January 2022 and prices of “Food and non-alcoholic beverages” surged by 483.15% yearly. The high inflation rate is mainly linked to the huge depreciation of the national currency to prior to January 2022 combined by the worldwide inflation due to several economic and political factors.
Real estate transactions for the month of December 2021 witnessed an increase in the number of RE transactions to reach 16,440 compared to 13,391 transactions in December 2020. Over the whole year 2021, number of Real estate (RE) transactions went up by a yearly 33.93% to stand at 110,094. In its turn, the value of total RE transactions stood at $15,550.46M by December 2021, compared to $14,386.58M in the same period last year, up by 8.09%. As for airport passengers, the activity at Rafic Hariri International Airport improved in the first month of in the year of 2022, to reach 363,685 passengers at the end of month up by 76.03% in January 2022. The total arrivals added 128.44% year-on-year (YOY) to stand at 153,230 passengers in January 2022. By the same token, the number of departing passengers climbed by a yearly 57.10% to reach 208,123 over the same period. Worth noting that positive regional developments could enhance Lebanese political and economic stability and reflect favorably on the movements of passengers at Beirut Rafic Hariri airport, particularly in the summer 2022.
According to the balance sheet of Banque du Liban (BDL), the central bank’s total assets added 8.82% compared to last year, to reach $163B by mid-February 2022. The increase was mainly due to the 42.41% year-on-year (YOY) rise in other assets, grasping 37.93% of BDL’s total assets and reaching $62.128B by mid-February 2022. Meanwhile, the gold account, composing 10.45% of BDL’s total assets, increased by 2.10% yearly to reach $16.76B by the same period as the international gold price is increasing globally amid political tensions between Russia and Ukraine. BDL’s foreign assets (grasping 10.52% of total assets) decreased by 25.57% YOY to stand at $17.227B by mid-February 2022. In details, BDL foreign assets hemorrhage has continued for the second consecutive week, as it slumped by $91.55M over the past 15 days as BDL is trying to control the exchange market rate through injecting dollars in order to appreciate the national currency. On the liabilities front, financial sector deposits (66.89% of BDL’s total liabilities) slightly increase by 1.78% and reached $109.576 by mid-February 2022; and Currency in Circulation outside of BDL increased by 25.01% and reached $28.07AB by mid-February 2022.
The data published by the association of Lebanese Banks’ showed that the total number of cleared checks in the Lebanese financial system slumped from 5,850,941 checks by December 2020 to 3,139,881 checks by December 2021. Moreover, the value of total cleared checks declined yearly by 32.33% to reach $36.42B by December 2021. In details, the value of checks in LBP dropped by 6.51% year-on-year (YOY) to reach $18.64B, while value of checks in foreign currencies decreased by 47.53% YOY to reach $17.78B by December 2021. Accordingly, the dollarization of cleared checks in terms of value went down from last year’s 62.95% to 48.82% by December 2021. Moreover, data released by the Ministry of Finance (MoF) recently indicated that Lebanon’s gross public debt hit $99.79B in October 2021, thereby recording an annual increase of 5%. The rise is mainly attributed to the annual increase in both local and foreign currency debt by 3.76% and 7.08%, respectively. As such, domestic debt constituted 61.78% of the total public debt.
It is worth noting that BOP recorded a cumulative deficit of $1,976 M by end of December 2021, compared to a deficit of $10,550M over the same period last year. Accordingly, Net foreign Assets (NFAs) of BDL fell by $4,583.3M, while the NFAs of commercial banks added $2,603M by December 2021. On a monthly basis, the balance of payment recorded a deficit of $399.8M in December 2021.
As for Lebanon’s consolidated commercial banks’ balance sheet, total assets decreased by 6.97%, year-to-date (y-t-d), and stood at $174.94B in December 2021. In details, resident customers’ deposits (which grasp 59.12% of total liabilities) decreased since December 2020 by 6.18% to $103.42B in December 2021, with deposits in LBP down ticked by 2.03% to $23.94B while the deposits in foreign currencies declined by 7.37% to stand at $79.48B. In addition, BLOM Bank published on 31/1/2022 its consolidated, un-audited financial results for year 2021. The results obtained were naturally affected by the impact of the financial and economic crisis that has struck Lebanon since October 2019. Net profits came to $4.444 million compared to $2.605 million at end 2020; while profits from discontinued operations amounted to $100.054 million. Moreover, the results of Byblos Bank showed incurred losses in 2021 that amounted to $17.9 million against losses of $103.8 million in 2020. It is worth noting, that the deteriorating economic and monetary situation in the markets, and the continued absence of agreement on an adequate financial rescue plan, makes it very difficult to estimate the negative effect of the current crisis on the Financial Statements according to the International Accounting Standards.
In reference to Central Bank Circular No 161 issued on December 16, 2021, regarding exceptional procedures for cash withdrawals, the Central Bank then adjusted the Circular to unlimited quotas on January 11, 2022 in order to halt the free-fall of the Lebanese currency. As such, the currency rose 24.17% in a period less than one week to be traded at around 24,800 LBP/USD by January 17, 2022 and regained 36.54% within a month to settle at around 20,740 LBP/USD by February 18, 2022. As such, average traded volume amounted to $38.48 M for the period between January 12 and February 18, 2022 with an average exchange rate swinging at around 20,900 LBP/USD. Moreover, BDL’ foreign assets dropped by 4.77% or exactly $862 M since mid-December 2021 to $17.22B by mid-February 2022 while total volume of dollars injected into the system through Sayrafa ala Circular 161 amounted to $1.22B for the same period.
PMI rose to Eight-months high in February, to record 47.5, its highest in the past nine months despite the decline in output and new orders – a positive sign in the midst of the prolonged crisis. It is worth mentioning that the appreciation of the Lebanese lira could be temporary, certainly if it wasn’t combined by a clear agreement with the IMF as BDL has limited foreign reserves and BDL cannot continue injecting more foreign currency for a long time. The government and BDL could work for a sustainable monetary solution to control the exchange rate only if a durable recovery plan is implemented for the economy.