Banque du Liban's last bi-monthly balance sheet of the Riad Salameh era, published on Aug. 1, carried a surprise: The central bank's foreign exchange reserves fell by $608 million in the space of two weeks.
According to the figures, this figure fell from $9.65 billion on July 15 to $9.04 billion by the end of the month, without taking into account the Eurobonds held by BDL.
This development runs counter to the trend from April, when the figure remained fairly stable, while Lebanon is trying to preserve these currencies as best it can.
Although BDL announced at the end of March that it was using its reserves to finance the conversion of Lebanese lira into dollars via its Sayrafa platform — in order to stabilize the exchange rate on the parallel market — its foreign currency reserves remained virtually unchanged.
To finance these operations, the Banque du Liban resorted to the parallel market to purchase dollars before reinjecting them.
Foreign currency was purchased in exchange for lira, which were then put on the market. This strategy succeeded in bringing the exchange rate down from over LL140,000 to less than LL97,000 to the dollar in the space of a few days.
"What has happened over the last two weeks is that the governor has allowed the exchange rate to appreciate, despite the opacity surrounding the end of his mandate, and has continued to finance Sayrafa operations directly from BDL's foreign exchange reserves, without resorting to the parallel market to purchase them," explained Marwan Barakat, head of Bank Audi's research department.
In the second half of July, the lira appreciated against the dollar, with the exchange rate rising from LL92,000 on July 15 to less than LL90,000 to the dollar by the end of the month.