Exclusive: Husni Bey: “Exchange Rate Adjustment, Production Tax and Sales Tax… Crisis Management, Not Economic Reform”

Libyan businessman Husni Bey said in an exclusive statement to our source: Amid the widespread debate surrounding the decision to adjust the dinar exchange rate and currency selling margins, this statement offers a critical journalistic reading of the real context in which the decision was issued, away from justificatory rhetoric or technical headlines, and from a direct economic perspective that places responsibilities in their proper context.

He added: The Central Bank of Libya is caught between spending pressure and a lack of options. Today, the Central Bank of Libya finds itself besieged between two contradictory realities that cannot be reconciled through partial policies or administrative decisions. The first reality is uncontrolled public spending through multiple channels, including: inflated wages amounting to 70 billion dinars, fuel expenditures of 98 billion dinars, broad and poorly targeted subsidies with an additional 18 billion dinars in various forms, operational spending of 14 billion dinars, and open-ended development spending of no less than 60 billion dinars.

A large portion of this spending has been financed through monetary expansion and the depletion of reserves, rather than through real resources or genuine economic growth that contributes to diversification and sustainability. The second reality lies in the near-total reliance on dollar revenues, which account for about 93% of the sources of financing public spending through oil sales—most of which are not deposited into the Treasury account at the Central Bank. These are single-source revenues, highly volatile and linked to external factors beyond any internal control.

He continued: Economically, this is an inherently imbalanced equation, under which it is impossible to speak of genuine financial or monetary stability. Within this imbalance, adjusting the exchange rate becomes a forced tool for crisis management, not a carefully planned reform choice. Therefore, the devaluation of the exchange rate is an inevitable outcome, not a sovereign decision. Reducing the dinar’s exchange rate by about 14%, from 5.40 to 6.35 dinars per dollar, along with abolishing the foreign currency tax, cannot be presented as an achievement or a reform step, nor should it be criticized, as it has effectively been a reality since April 2024. Rather, it should be read as the logical result of an unsustainable financial path that began in 2023, when public spending was financed through the creation of 40 billion dinars out of thin air, in addition to 30 billion dinars printed in Russia, instead of addressing the imbalance in its time—namely in 2016 and the first quarter of 2024.

Despite the notable growth in foreign currency and gold reserves between 2018 and 2023, the purchasing power of the dinar continued to collapse, clearly demonstrating that the accumulation of reserves does not automatically mean a strong economy, nor does it protect the currency under distorted fiscal policies. The real value of the dinar is not imposed by administrative decision; it is determined by the market as a direct reflection of the equation between revenues and expenditures, not by the size of declared reserves.

He added: Who pays the price? The citizen, always. Away from official rhetoric, the economic truth remains one: all costs—whether deficit financing, exchange rate devaluation, production tax, sales tax, or all fees including price gaps and check burning, and everything related to currency pricing and exchange—are borne by the citizen. The government does not truly lose, traders do not bear losses in the medium term, and no single group shoulders the burden alone. The cost is redistributed across society as a whole through rising prices, accelerating inflation, erosion of purchasing power, and declining living standards. Any burden that temporarily falls on one party is automatically passed on to the final consumer, as the market reallocates it to the majority without exception.

He continued: Currency selling margins are an administrative detail that does not govern the market. The debate over currency selling margins (2% or 4%) exceeds their real significance. These margins are not a pricing policy, not a tool to regulate the market, and do not represent a solution to monetary imbalance; they are merely a service cost. The real price remains subject to the balance of supply and demand. As long as monetary expansion and market distortions persist, no official margin will prevent the formation of another effective price outside the official framework, nor will it eliminate the parallel market.

He also said: Exchange rate devaluation, price gaps, and check burning are nothing more than undeclared taxes. From an economic perspective, exchange rate devaluation is no different from imposing an indirect tax. Likewise, the gap between the official and parallel rates represents another disguised tax. The only difference lies in who receives the proceeds. In the price gap, the beneficiary may be an individual or an entity that obtained foreign currency at a preferential public or private rate worth millions of dollars, or an individual through $2,000. In official taxation or exchange rate changes, the beneficiary is the public treasury. In both cases, however, the payer is the same: the Libyan citizen.

He went on: The real imbalance runs deeper than the exchange rate. The exchange rate imbalance is not the root of the crisis, but rather a direct reflection of deeper distortions in fiscal policies, the structure of public spending, the non-deposit of oil sales revenues, and the method of deficit financing. As long as these roots are not addressed, changing the exchange rate, imposing fees, or adjusting selling margins will all remain tools for managing the crisis, not solving it.

He concluded: In summary, adjusting the exchange rate in Libya is not an economic reform, but a forced measure imposed by an unsustainable financial reality. As long as uncontrolled public spending, near-total reliance on dollar revenues, and deficit financing through money creation continue, the cost will always be passed on to the citizen, and the exchange rate will remain a mirror reflecting the depth of the imbalance, not a tool to address it. True stability is not achieved through statements or partial solutions, but only when the objective is clear: real economic growth, financial and monetary stability, and a genuine and sustainable improvement in citizens’ living standards. The issue of imposing sales and production taxes is nothing more than another distortion reproducing an old film that has been repeating since 1982—one that could have been avoided. I acknowledge good intentions, but unfortunately, we do not learn from our past and repeated mistakes.