By: Financial Analyst Khaled Al-Zantouti
Many economists and financial experts, as well as some “merchant analysts,” have offered their views on economic theory, its established principles, changing variables, and their impact on the weakness of the dinar and its sharp decline against the strengthening US dollar. Many have discussed the money supply, M1 and M2, inflation, purchasing power parity (PPP), the Marshall–Lerner condition, and supply-and-demand curves, among other concepts. Unfortunately, however, we have yet to find a solution to the dinar’s decline, which is approaching the threshold of LYD 1 to the dollar, and the situation may get even worse. Could we reach 15 or 20 dinars to the dollar, or even the levels seen in Iraq and Sudan?!
The dinar will certainly continue to decline as long as we attempt to address the problem solely through economic theories and the laws of supply and demand, as though we were a unified state governed by science and experts, and guided by integrity and sound management. Unfortunately, we live in an environment characterised by a struggle for wealth and the pursuit of it by any means, whether lawful or unlawful, legitimate or illegitimate, legal or illegal. Administrative and financial corruption has, in fact, become a means of seizing the spoils by any means possible.
We can never take our official figures on letters of credit, fuel, and contracts at face value, as though they accurately reflected actual consumption or capital expenditure contributing to sustainable development. For example, economic studies based on per capita consumption, whether of food or fuel, suggest that we may consume several times the global average per person in flour, wheat, rice, and fuel, and perhaps even Nutella, soft drinks, and tobacco! These goods are not ending up in people’s stomachs; they are ending up in people’s pockets. This is corruption, ladies and gentlemen. Yet some “merchant analysts” will tell you that these figures simply reflect the laws of supply and demand and the true forces of the market.
The reality is quite different. Just imagine: the actual value of what should be consumed from the tens of billions in letters of credit opened for our “esteemed merchants” may not exceed 30%, while actual consumption of imported fuel may account for no more than 40% of its import value. So where does the remaining two-thirds, or more, go?
The truth is that it is corruption. The money accumulated by corrupt individuals is what drives demand for dollars at any price, whether to launder money, accumulate wealth abroad, or transfer funds overseas by any means. All illicit funds, whatever their source, seek dollars at any price. In doing so, they put pressure on the dinar and erode its value.
Therefore, the problem is not simply spending itself. The real problem lies in corrupt expenditure driven by political and institutional power-sharing arrangements, buying loyalties, inflated contracts, fraudulent letters of credit, and the exploitation of Libyans’ livelihoods, among other practices.
Be assured that our problem is not our consumption, but our corruption! And be equally certain that if we all work to eliminate corruption in all its forms and address its underlying causes, the value of our dinar will rise. Otherwise, our dinar will continue its downward spiral!
