Libyan businessman Husni Bey stated in an exclusive comment to our source: “The withdrawal of a banknote denomination or a specific issue of currency — whether it is the 50, 20, 5, or 1 dinar note — does not mean canceling the nominal value of the currency or the issue to be withdrawn. Rather, the withdrawal is merely a replacement of one form of money with another within the money supply, and a restructuring of the monetary base without any change to the overall totals.”
He continued: “For clarification, the term “money” applies to paper currency, which represents a liability of the Central Bank of Libya to the public (currency holders), in addition to deposit liabilities — or demand deposits — at commercial banks, which represent a liability of commercial banks to depositors.”
He added: “The proof that this decision does not reduce the total money supply or the monetary base (i.e., the Central Bank’s liabilities to paper currency holders + the reserves held at the Central Bank as legal reserve requirements, which stood at 20% of deposit liabilities until the end of 2024 and were raised to 30% by the Central Bank’s Board of Directors in 2025). Also, the cancellation of denominations does not affect additional reserves or the portion exceeding the 30% required by the Board.”
He confirmed: “For reference, the 30% threshold — the legal reserve or holding requirement — has been exceeded, bringing the total reserve held to nearly 50% (exceeding the required amount by 20%). This supports the theory that the liquidity shortage may be linked to this excess reserve, which was recorded during 2023 and the first quarter of 2024, during which the money supply increased by 37 billion dinars over 15 months.”
He concluded: “Canceling denominations does not amount to canceling money; it simply results in a replacement.” Based on published information about an additional 3 billion dinars in unreported currency, the negative effects of that may already have taken place. Yet, uncovering this breach allows the Central Bank to restructure the monetary base on scientific grounds. We now await the outcomes of the cancellation of previous issues of the 20-dinar note in order to complete the picture and make corrective decisions regarding past failures.”
