Balance of payments deficit
at $208 million in first half

Deficit narrows 81 percent

The deficit in the balance of payments (BoP) narrowed by 81 percent to $208 million in the first half of 2018 compared with the same period a year earlier, according to data issued recently by the Central Bank (BDL).

The $208 million deficit resulted from an increase of $2.2 billion in BDL’s net foreign assets and a decrease of $2.41 billion in the net foreign assets of banks and financial institutions during the first half of the current year.

Starting in November 2017, BDL began to include local sovereign bonds – issued in foreign currencies – in its foreign assets.

“Commercial banks were freeing up dollars through the sale of Eurobonds in an effort to place dollars at the Central Bank in exchange for attractive returns,” states Blominvest’s ‘Lebanon Brief’ report.

Financial expert and economist Joe Sarrouh said that the major reason for the improvement in the BoP was that capital inflows and remittances are improving, thanks to rising oil prices and attractive interest rates on the local market. He said that this is shown by the fact that deposits are expected to grow by five percent during the current year. Sarrouh said that some of the nearly $2.6 billion in deposits that were withdrawn from the banking system following the resignation of the Prime Minister in November 2017 could have been deposited again.

The chronic trade deficit inched down 0.3 percent to $7.83 billion in the first six months of 2018 compared with the same period a year earlier, according to Customs’ data.

The BoP was consistently registering surpluses from 2002 until 2010, and then it started to record deficits with the escalation of regional turmoil, especially the war in neighboring Syria. The only surplus over the period of 2011-2017 was registered in 2016, following a major swap operation that BDL performed with the banks.

Sarrouh said that the improvement in the BoP shows that no capital is fleeing Lebanon and that the country is enjoying monetary stability and the national currency is in good health. Speeding up the formation of the new Cabinet will enhance confidence, he said.