Al-Farisi Writes: The Central Bank’s Plan to Contain the Liquidity Crisis and Regulate Monetary Policy (2026)

Ayoub Al-Farisi, a member of the Monetary Policy Committee at the Central Bank of Libya, wrote an article entitled: “The Central Bank’s Plan to Contain the Liquidity Crisis and Regulate Monetary Policy (2026).”

The Central Bank of Libya has established a set of clear objectives and implementation steps, along with a defined timeline to address liquidity bottlenecks and transition toward a regulated digital economy.

The measures, their rationale, and their expected outcomes can be summarized as follows:

1. Managing the Paper Money Supply and Ensuring Regular Liquidity Injections:

• A contract has been signed to print LYD 90 billion to make up for the shortage and replace withdrawn banknotes with new currency. This includes issuing LYD 50 and LYD 10 banknotes made from “polymer” paper in accordance with international specifications. Starting in August 2026, the flow of newly printed cash will accelerate, with LYD 5 billion to be injected monthly through bank branches and automated teller machines (ATMs).

The aim is to achieve a fully regular and sustainable supply of liquidity for citizens, build confidence in the banking network and ATMs, and ensure the stability of day-to-day transactions.

2. The Digital Boom and Expansion of Electronic Payments:

There has been a comprehensive expansion in electronic payment tools, with transactions reaching LYD 500 billion by the end of July 2026. Electronic transactions are expected to exceed LYD 800 billion by the end of the year.

Through this, the Central Bank aims to reduce excessive reliance on physical cash, which has periodically caused bottlenecks in the banking system, while providing fast and secure payment alternatives.

The Central Bank confirms that there has been a significant and sustained decline in the use of physical cash in the Libyan economy, alongside a gradual transition toward a digital economy. This improves the efficiency of commercial transactions and reduces the costs associated with printing and managing cash.

3. Eliminating Price Distortions (The Gap Between Cash and Cheque Transactions):

A financial achievement has led to the disappearance of the gap between purchasing US dollars in cash and purchasing them through cheques, with the difference narrowing from LYD 1.6 per US dollar to just 100 dirhams.

This represents a restoration of the full nominal and legal value of cheques and electronic payment instruments, bringing them on par with physical cash. This protects citizens’ purchasing power and puts an end to traders’ speculation in parallel markets.

4. Integrating Foreign Workers into the Formal Financial System:

This will be achieved by regulating foreign workers and linking them to official electronic payment methods and digital wallets. The objective is to limit the circulation of large amounts of liquid cash outside the banking sector by large segments of the workforce, prevent funds from leaking into informal channels, reduce the enormous pressure on demand for physical cash, and integrate the financial transactions of foreign workers under a secure and regulated framework that contributes to managing the money supply.

5. Legislative Frameworks to Combat Cash Hoarding:

The adoption of a draft law on “Preventing Hoarding and Regulating the Circulation of Libyan Cash,” based on specified values and thresholds for all economic activities, aims to curb the negative practice of holding huge amounts of cash in household safes and in the private possession of traders and citizens outside the banking cycle.

These developments in 2026 reflect an integrated vision by the Central Bank. It is not merely treating the “symptom” by regularly printing and injecting cash liquidity; rather, it is addressing the “root cause” through digital development, eliminating price distortions, and enacting legislation to prevent cash hoarding. This signals the potential transition of the Libyan economy toward an advanced stage of monetary stability, provided that all policies work together and remain aligned with the Central Bank’s monetary policy.