Exclusive.. Central Bank Monetary Policy Committee Member Reveals to Sada the Reasons Behind the Rise in the Dollar Exchange Rate on the Parallel Market

Member of the Monetary Policy Committee at the Central Bank of Libya, Ayoub Al-Farisi, spoke to Sada Economic Newspaper, saying:

“The issue of the exchange rate and its rise on the parallel market, despite the efforts of the Central Bank and the injection of foreign currency into the market, is, of course, influenced by many factors. Some of these are under the Central Bank’s control, while many others are beyond its will or control.

“Normally, with a fixed or pegged exchange rate, when the Central Bank intervenes by increasing supply, prices stabilize and a balance is reached over time. However, what is happening in Libya is that there is a black hole swallowing up these dollars. Therefore, no matter how many dollars the Central Bank injects, it is difficult to narrow the gap significantly, particularly given the failure to adhere to development spending and the absence of financial data, specifically.

“The absence of financial data holds the key to the difference between the official and parallel exchange rates. This indicates that there is significant government spending chasing the dollars injected by the Central Bank. In other words, a small quantity of dollars is being chased by a large quantity of Libyan dinars.

“He added: ‘By the end of the year, if the financial data are disclosed, we will see the scale of public spending in 2026 and will then confirm whether there has been an expansion in the public budget. This is evident from continued spending without a unified budget, as well as duplicate spending by two governments. Under such circumstances, exchange-rate stability is simply not possible. In other words, the government is not spending in line with its revenues; rather, spending exceeds revenues.’

“According to Al-Farisi, another factor putting pressure on the exchange rate is the fuel issue. The fuel file places a heavy burden on the public budget and also on monetary policy, because a significant portion of the dollars used to finance fuel imports exceeds actual demand. The amount exceeding demand in July—$1.5 billion in a single month—is an astronomical and extremely large figure that deprived the Central Bank of the ability to use those funds to defend the value of the Libyan dinar.

“Al-Farisi continued: ‘All these variables, in addition to the lack of control over imports and the expansion of imports through mechanisms such as letters of credit, without studies, prioritization, or determining the quantities of goods, constitute leakages that are incompatible with exchange-rate stability and represent a waste of the Central Bank’s assets.

“He continued: ‘If the government is unified in the near future, based on what the Libyan public is seeing and monitoring, I believe these matters will change through the existence of unified spending and a single budget aligned with revenues, along with the implementation of reforms. These are the reforms that the key actors in the economy promised when they asked the Governor to withdraw his resignation.

“If there is a genuine intention to address these issues, there could then be an improvement in the exchange rate. Evidence of this can be seen in the fact that when the unified spending agreement was signed—even before it entered into force—we witnessed a very significant narrowing of the gap between the official and parallel exchange rates. So what would happen if this agreement covered all budget items and there were a single government?’

“He also said: ‘I believe this is the only solution, and the solution that would allow the Central Bank to achieve exchange-rate stability. Otherwise, I believe the Central Bank will merely be putting out fires rather than formulating policy within a suitable and favorable environment.

“There is no coordination between spending policies, as reflected in exchange-rate behavior. Spending remains at the pace of previous years; therefore, demand exceeds supply, and consequently, there will continue to be a parallel market.’”