Exclusive | “Al-Kilani” Reveals to Sada the Impacts of the Decision to Add New Taxes on Goods… and the Steps That Would Contribute to Its Success

Adel Al-Kilani, a university lecturer at the Faculty of Economics at the University of Benghazi and a specialist in the banking sector, said that the Central Bank of Libya’s decision to devalue the dinar to (6.36 against the US dollar) came after the Central Bank officially announced on Sunday, 18 January 2026, a decision to adjust the Libyan dinar exchange rate against Special Drawing Rights, which is approximately equivalent to LYD 6.36 per US dollar—a devaluation of 14.7%.

He added: the question that arises is, why this decision now? The Central Bank of Libya aims to narrow the gap between the official rate and the parallel market rate, which has exceeded LYD 8.7 per dollar, as well as to preserve what remains of foreign currency reserves amid declining oil revenues and rising public spending. Through this measure, the Central Bank also seeks to improve liquidity in commercial banks and control the high demand for foreign currency.

He also said: the House of Representatives’ decision to adopt the production and consumption tax coincided with the Central Bank’s decision. Accordingly, the decision to regulate the production and consumption tax and regulatory fees on a wide range of goods and capital assets was approved, with implementation beginning on 18 January 2026. Through this decision, the House of Representatives aims to diversify sources of national income away from oil revenues and attempt to curb excessive consumption of certain luxury goods.

He continued: so how will this be reflected in the Libyan market and on citizens? The duality of (currency devaluation + new taxes) will create a wave of changes in the market, including:

1. A major wave of inflation: Prices are expected to rise noticeably, especially as the holy month of Ramadan approaches, since Libya is a rentier state that relies heavily on imports. The new dollar rate will increase the cost of importing goods, and with the addition of production and consumption taxes, this increase will be multiplied for the final consumer.
2. Erosion of the purchasing power of the Libyan dinar: Salaries paid in Libyan dinars will lose a significant portion of their real value against goods and services, potentially placing a heavy burden on low-income households.
3. Psychological impact on the parallel market: If the Central Bank of Libya succeeds in providing sufficient foreign currency at the new rate easily, the parallel market may stabilize and gradually decline. However, if restrictions on letters of credit continue, the parallel market may continue to rise.
4. The private sector: Institutions and companies will face challenges in pricing their products and in the cost of raw materials, which may lead to a period of temporary stagnation until the market settles at the new equilibrium price.

He concluded by saying: ultimately, the economic success of these (harsh) steps depends on the Central Bank’s ability to open the letters of credit system widely and continuously, and on the government’s ability to control prices and prevent monopolistic practices.