A photo of Banque du Liban's offices in Beirut, taken at a unknown date. (The Daily Star/Mohammed Azakir)
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2- BDL's report first asserts that the paper disapproves of BDL's policy of the exchange rate peg.There are two major points in BDL's reply: BDL's net reserves and its interest rate policy. However, BDL likely has other FX reserves that are not clearly published in its balance sheet but are noted elsewhere on its website as "Foreign Securities" under the heading "Foreign Assets of BDL".BDL can address this issue by simply publishing details on its reserves and all its foreign assets, which it doesn't.The paper nonetheless clearly notes that "net reserves" are calculated as FX reserves net of all bank FX deposits at BDL, using an approach that is also used by the IMF, e.g. in an unpublished report in the summer of 2016 (IMF 2016, p. 9, par.Compared to these reference rates, interest rates paid by BDL to banks have been generous for years.The central banks in Europe and the U.S. did it to stimulate the economy, whereas BDL expanded its balance sheet through bringing in more FX deposits from banks by offering them significantly higher interest rates to induce them to transfer deposits from correspondent banks abroad to BDL. Another reason for the expansion, especially in 2016, is the substantial profits BDL paid to banks in lira through issuing lira-deposits to banks.
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