BDL reserves depleted by war despite fiscal austerity

Banque du Liban (BDL)’s foreign exchange reserves fell by a worrying $468 million between the end of September and mid-November, dropping to $10.19 billion. The main reason for this decline is the escalation of military confrontations between Hezbollah and Israel, combined with an increasingly unsustainable monetary policy.The war caused a drastic drop in air traffic to Lebanon, depriving the country of a crucial influx of foreign currency from tourists and expatriates. This caused a general slowdown in economic activity, affecting retailers' and importers' demand for Lebanese lira from BDL. As a result, the reserves of the central bank, which received dollars in exchange for these transactions, became even more fragile.On top of this, BDL has orchestrated a significant acceleration in depositor withdrawals, in accordance with...