Lebanon: Foreign Exchange Risk is Minimal

The Central Bank of Lebanon (BDL) has released bi-monthly data showing the loss in reserves since the crisis began at approximately US$1.38bn, starting from a reserve position of US$12.0 at the onset of the crisis on July 12. Five-year deposits made by the Saudi and Kuwaiti governments at the BDL amounting to US$1.5 billion bring total reserves to US$12.2 billion.

These same governments also deposited grant funds at the BDL intended for humanitarian and reconstruction efforts, and amounting to US$1.1 billion. Given that such funds take time to disburse, total foreign exchange reserves at the BDL are currently about US$13.22 billion (plus US$6 billion in gold). Total LBP deposits in the Lebanese banking system amounted to US$16.5 billion at the end of June. If the amount of US$1.35 already converted is subtracted, the system now contains US$15.15 billion in LBP deposits, meaning that even if gold reserves are left out of the calculation the BDL is capable of covering almost all LBP to US$ conversions if that were required. The BDL is likely to receive further deposits from GCC countries if this crisis is extended.