The founder of the Libyan Stock Market and finance professor, Suleiman Al-Shahoumi, published a post in which he wrote: Central Bank of Libya and Ministry of Economy, coordination or an impending confrontation?
Is the Central Bank, through coordination with the Ministry of Economy, trying to curb inflation or to rein in the exchange-rate turmoil?
By the end of this month, Ministry of Economy and Trade Decision No. (449) of 2026 will come into effect. The decision prohibits commercial goods from entering Libya outside the banking channels and prohibits customs clearance of any shipment before its banking and customs procedures have been completed and proof of its actual value has been provided. The decision makes an exception for individual business owners within an annual ceiling and sets out arrangements for shipments whose procedures had begun before this date.
The idea itself is sound. Bringing trade into the banking system makes the movement of money visible, helps combat money laundering, and allows the Central Bank to determine the actual level of demand for dollars. There is no disagreement over the objective. The disagreement concerns the sequencing and whether the official channel is ready to receive what will be directed through it in just a few weeks.
Let us begin with what matters to the citizen. When the price of a commodity rises at a store, we always assume that the reason is the rise in the dollar. This is only partly true. The commodity reaches the consumer after passing through a long chain that begins with financing and opening a letter of credit, followed by purchasing, shipping and insurance, then the port, customs, clearance, storage and transportation, and finally wholesale and retail. Any delay at any link in this chain becomes a cost, and every cost ultimately reaches the consumer. The citizen does not pay only for the commodity itself; they also pay for the journey it took to reach them.
What the figures say:
The figures announced for the first half of this year reveal a different picture from what is commonly believed. Letters of credit amounted to $8.3 billion, representing more than half of foreign-currency usage. This means that trade is already largely within the banking system and that imports are not all taking place outside it, as is often claimed. As for the portion targeted by the new decision, no figure has been announced for its size, making it difficult to prepare to accommodate something whose volume we do not know.
The same figures contain another indication worth considering. Foreign-currency cash sales for personal purposes fell by more than half, while transfers rose to $2.2 billion, compared with less than $300 million last year. Demand for dollars has therefore not declined; it has simply moved from one channel to another. This is precisely what should be expected once the Ministry of Economy’s decision takes effect: some trade will enter the letters-of-credit system, some will temporarily stop, and some will seek another, more expensive route. The additional cost will not be borne by the trader out of pocket; it will be added to the price.
There is a third figure that sums up the entire problem. Traders’ cards, which are supposed to serve small importers, did not exceed $38.9 million, or just two dollars out of every thousand. The tool intended for small traders is virtually inactive at the very moment small traders are being asked to move into the banking system. The exception included in the decision gives them the right to import, but it does not provide them with dollars or with the banking instrument through which the import process can be carried out.
The root of the gap is not imports:
The official exchange rate today is around LYD 6.34 per dollar, while the parallel market is at approximately LYD 9.25. Before discussing the gap, it is only fair to say that the proper comparison is not with the announced rate, but with the rate actually paid by the importer after adding the fee imposed on foreign-currency sales. The real gap is narrower than commonly stated, but it remains significant, and the fee itself becomes part of the cost of the commodity and ultimately reaches the consumer.
The reason behind this gap is not fundamentally commercial. The Central Bank itself attributed the two devaluations of the dinar within less than a year to government spending by two governments, the absence of a unified budget, and declining oil revenues. In other words, the imbalance originated on the spending side, not the import side. Restricting trade may reduce recorded demand for dollars, but it does not address the cause that created the gap. Anyone who addresses supply without addressing the underlying cause will find themselves facing the same problem months later, only in a new form.
A ban with a date and a facilitation promise without one:
The Central Bank and the Ministry of Economy say they are coordinating, and this is true on the surface. The Central Bank was the one that requested this decision and announced that it would accelerate foreign-currency requests in response to the Ministry of Economy’s decision.
But there is a fundamental difference between the two commitments. The ban was issued as a binding decision, with a specific date and a clear penalty: suspension of customs clearance. The facilitation, however, came in the form of a general agreement and a promise without a date, without a figure, and without a maximum timeframe for completing a letter-of-credit request. When the ban is clearly defined while the facilitation is not, it is natural for the first to be implemented on schedule while the second is delayed. This is precisely where regulation can turn into a new bottleneck.
The question of banks’ readiness also remains. The technical payment infrastructure is functioning and expanding, and this is not in doubt. However, foreign trade transactions are concentrated in a small number of banks, with one bank accounting for approximately $2.6 billion of usage in half a year. Adding thousands of small traders to the same banks means longer queues, not broader service. Moreover, the only practically available instrument is the letter of credit, which is designed for large transactions and requires guarantees that small traders do not possess. There is no short-term financing to cover the period between payment, arrival and sale, nor is there a credit record that allows a trader to be assessed based on their performance rather than their collateral. In addition, part of the time required to process a letter of credit is spent outside Libya, at correspondent banks and in meeting compliance requirements — time that cannot be controlled.
What should be done:
The solution is not to cancel the decision, but to support it with measures that make it implementable without making citizens pay the price. First, there should be a publicly disclosed estimate of the volume of imports currently conducted outside the banking system, because preparedness requires a figure, not an impression. Second, registration should be opened to importers before implementation, with the number of applications processed and the time taken measured, and the effective date should be linked to the results of this test rather than to a calendar date. Third, a genuine instrument for small traders should be activated, with a realistic ceiling and a banking product that actually works; otherwise, the exception will remain merely a provision on paper. Fourth, a maximum timeframe should be announced for processing letters of credit and transfer requests, with the actual average processing time published monthly. A trader can tolerate a slow procedure if its duration is known, but cannot tolerate an unknown procedure because uncertainty itself is added to the price. Fifth, there must be a clear arrangement for shipments that have already been contracted and actually shipped, because port delay penalties and storage costs will ultimately be passed on through the price of the commodity.
In the longer term, the Central Bank should address the source of the gap rather than its symptoms. It should announce a regular, quantified program for dollar sales for letters of credit and transfers, expand the number of banks capable of handling foreign-trade transactions, and publish monthly data on applications submitted, executed and rejected. The Ministry of Economy should consolidate procedures into a single window with announced timelines, measure and publish the time and cost of customs clearance at ports, and shift from monitoring the final price to identifying where costs have increased along the supply chain. It should ask one question about every new regulation: How many traders will this drive out of the market? Because the number of importers is not merely a matter of prices; it is a matter of supply security. If the market becomes dependent on a small number of companies, the failure of one of them can affect the entire market within days.
How should the policy be assessed after implementation?
Two months from now, it may be said that the rate of compliance with the decision is high, and this will be presented as a success. But that is not the measure of success. There are three criteria: Has the gap between the effective official exchange rate and the parallel-market rate narrowed? Has the time between submitting a letter-of-credit application and the shipment leaving the port decreased? And has the dinar price of the basic-goods basket stabilized compared with its price in the country of origin?
If all three improve together, the friction contributing to higher inflation will genuinely have declined. If only one improves, it means the bottleneck has not been resolved; it has simply moved from the foreign-exchange market to store shelves.
Ultimately, the goal is not to prevent traders from using another route, but to make the official route faster, cheaper and broader so that no one needs an alternative. The real test of this decision will not be the number of shipments it stops, but the price of the commodity three months after its implementation.
