Our source has obtained a copy of a letter from Unity Government Finance Minister Rashed Abughaffa to the Governor of the Central Bank of Libya, in which he rejected claims that government public spending was responsible for the rise in the exchange rate and commodity prices.
Abughaffa called for the formation of a joint committee with the Central Bank to assess pressures on foreign reserves, following the absence of revenue and expenditure data from his ministry.
Finance Minister Challenges Direct Link Between Spending and Exchange Rate
According to the letter, directly linking the level of public spending to the rise in the dollar exchange rate is not, by itself, sufficient to establish a direct or exclusive relationship.
The minister noted that the exchange rate is affected by a range of interconnected factors, including:
- The volume of foreign-currency sales
- Oil prices
- Monetary policy
- Market expectations
The letter therefore argues that changes in public spending should not be treated as the sole explanation for movements in the exchange rate.
“Parallel Spending” Must Also Be Considered
Abughaffa also argued that it would be unreasonable to assess the impact of public spending controlled solely by the Ministry of Finance while attributing total public expenditure to the ministry.
According to the minister, there is also parallel spending outside the direct control of the Finance Ministry, which must be taken into account when assessing the overall impact of government expenditure.
This distinction, he argued, is essential for a more accurate assessment of the relationship between fiscal policy and exchange-rate pressures.
Fuel Bill Comes Under Scrutiny
The minister’s correspondence also highlighted the rising cost of fuel and called for a review of the fuel bill.
The proposed review should examine several factors, including:
- Imported and distributed quantities
- Supply prices
- Shipping costs
- Smuggling and losses
- The efficiency of domestic refineries
According to the letter, examining these elements is necessary to determine the factors driving the increasing fuel expenditure.
Rising Public-Sector Payroll
The correspondence concluded by addressing the expansion of the public-sector workforce and the rising wage bill.
Abughaffa said that the growth in public-sector employment and the increasing payroll burden had forced the government to become an employer, particularly amid shortcomings in the banking sector’s ability to finance small and medium-sized enterprises.
The minister also pointed to the scale of documentary credits executed during 2025, which reached approximately $15.7 billion.
The letter calls for a broader assessment of Libya’s fiscal and monetary pressures rather than attributing exchange-rate and price movements solely to government public spending.
