Exclusive: Al-Gmati Warns That a Freeze on Dollar Flows to Libya’s Central Bank Could Turn a Currency Crisis into a Food and Medicine Crisis

Dr. Helmi Ahmed Al-Gmati, an economics professor at the University of Benghazi, told Sada Economic Newspaper exclusively that the greatest risk facing Libya today may not be the rising dollar exchange rate on the parallel market, but the possibility of foreign currency flows into the Central Bank of Libya’s accounts being disrupted, including oil revenues, if disputes over the legitimacy of the bank’s leadership and the channels used for financial transfers escalate.

Al-Gmati added that Libya had experienced serious consequences during the crisis involving former Central Bank Governor Saddeq Al-Kabir, when a struggle over control of the institution disrupted its operations. A resolution was reached only after political and international understandings led to new arrangements for the bank’s leadership. However, repeating that scenario today could prove more complicated, as the solution requires more than replacing the governor: it also requires restoring institutional trust and ensuring that international financial institutions recognize and accept instructions issued by Libyan banking authorities.

If the international community moves to suspend transfers or restrict financial transactions, the consequences will not be borne solely by the officials involved in the dispute. Ordinary Libyans will also pay the price through reduced purchasing power and difficulties accessing essential goods. Disruptions to documentary credit processing and delays in transferring payments to suppliers could affect the movement of goods through ports, increase import costs and undermine the availability of food, medicine and fuel—even if the dollar exchange rate does not rise immediately.

Al-Gmati stressed that continued divisions among Libyan institutions could further reduce the chances of reaching a swift settlement, particularly in the absence of a clear institutional arrangement that reassures international partners about the proper management of oil revenues and external payments. Libya’s experience has shown that domestic decisions, regardless of their form, cannot achieve their intended results when they encounter a lack of trust and recognition within the international financial system.

He explained that, from an economic perspective, it is not enough for Libya to possess oil revenues or financial reserves. These funds must also be accessible, transferable and available for appropriate use. Dollars that cannot be accessed cannot finance a letter of credit, pay a medicine invoice or ensure the delivery of a food shipment.

Al-Gmati warned that the threat extends beyond the exchange rate to food and medicine security and social stability. What is needed is not another struggle over the governor’s position or a superficial response to the crisis of confidence, but a clear institutional settlement, full transparency regarding oil revenue flows, continuity in external payments and protection of citizens’ basic needs.

He proposed five practical steps to address the situation.

First: Reach an urgent, time-bound institutional agreement.

The relevant Libyan authorities should agree on clear arrangements for managing the Central Bank in accordance with applicable laws. These arrangements must define powers and authorized signatories and prevent conflicting instructions from being issued. The agreement should be based on documented procedures rather than verbal understandings that could collapse.

Second: Establish a direct technical communication channel with international partners and correspondent banks.

The Central Bank’s management, in coordination with the relevant Libyan authorities, should provide documentation confirming the validity of its authorizations and compliance with financial requirements. It should also seek written confirmation that the settlement of transfers, oil revenues and existing letters of credit will continue. The aim is to prevent political disputes from disrupting banking transactions and to address any suspended transactions on a case-by-case basis.

Third: Create a transparent mechanism for tracking oil revenues.

Data should be regularly reconciled among the National Oil Corporation, the Libyan Foreign Bank and the Central Bank of Libya. A unified statement should be published showing the value of revenues collected, deductions, transfers completed, amounts actually credited to accounts and the reasons for any discrepancies. Transparency in this area is not merely a communications measure; it is a safeguard for domestic and international confidence.

Fourth: Adopt an emergency plan to maintain essential imports.

The authorities should identify outstanding letters of credit, due payment obligations and available food and medicine stocks. Essential payments should receive priority according to published, auditable criteria. Coordination with correspondent banks and suppliers should help reduce shipment delays and facilitate the release of goods without bypassing legal requirements or granting unjustified advantages to particular importers.

Fifth: Introduce institutional safeguards to prevent a recurrence.

These safeguards should include regular publication of data on oil revenues and foreign currency flows, independent oversight of high-risk transactions, and a clear mechanism for resolving disputes over the Central Bank’s leadership and powers. The objective is to protect monetary policy from political disputes and strengthen accountability.

Al-Gmati said these steps should be implemented according to a publicly announced timetable. Urgent measures during the first few days should establish clear authority and protect payments. Data reconciliation and operational problems should then be addressed over the following weeks, before sustainable oversight and institutional safeguards are adopted.

He also stressed that international engagement should aim to ensure the continuity of legitimate transactions and protect the Libyan economy, rather than allowing citizens to become hostages to political disputes. This approach should not be interpreted as giving any external party the authority to choose the Central Bank’s leadership. Instead, Libya needs a solution grounded in law, supported by clear institutional acceptance, and capable of addressing international concerns about compliance and transparency through cooperation with relevant international partners.

Al-Gmati posed a question for policymakers: Do they recognize that a struggle over the Central Bank could ultimately undermine the state’s ability to use its most important financial resources—and that ordinary citizens would be the weakest link in the chain of losses?

Protecting the Central Bank, he concluded, is not merely an administrative matter. It is essential to safeguarding purchasing power, food and medicine security, and the stability of the national economy. The opportunity now is to move from managing a crisis after it occurs to preventing it through a clear institutional agreement, financial transparency and practical guarantees for continued revenue flows and external payments.

Al-Gmati concluded by emphasizing that the possibility of accounts being frozen or oil revenue flows being suspended is a warning scenario, not confirmation that an international decision to this effect has actually been issued.