According to Banque Du Liban statistics, opened letters of credit (L/Cs), a measurement tool for trade activity, fell by 3.97% during the month of June 2021 to reach $8.03 million, down from $8.36 million in May. On a cumulative basis, the face value of opened L/Cs came in 72.61% lower y-o-y at $123.38 million during the first half of 2021, compared to $450.41 million a year earlier. This drop owes to the reluctance of banks since the last quarter of 2019 to renew or open new L/Cs to corporate clients as a result of the shortage in foreign currency liquidity after the October 17 protests and bank run that followed. These incidents led to the resignation of the previous government and the failure of the caretaker government to implement structural reforms to put Lebanon’s economy on a sustainable track, restore confidence, and attract capital inflows to the financial sector.

Documentary L/Cs opened to finance imports activities contracted by 90.98% on an annual basis to $26.47 million YTD June 2021, from $293.53 million during the same period last year. Concurrently, utilized credits for imports fell by 91.52% to $31.24 million, down from $368.42 million by June 2020. Inward bills for collection, another documentary credit form of financing (backed by invoices), fell by 18.48% y-o-y to $133.40 million by end of June, from $163.65 million in the same period in 2020.

In a related note, documentary L/Cs opened to finance exports activities dropped by 50.92% on a yearly basis to $61.69 million in the first half of 2021, from $125.70 million in the equivalent period last year. Concurrently, utilized credits to finance exports receded by 86.87% to $41.26 million (66.88% of opened L/Cs for exports). In the same vein, the value of outward bills sank by 38.22% annually to $96.92 million YTD June 2021, with outstanding bills for collection slipping by 13.09% to $216.78 million.