Tag: central bank

Economic expert Saber Al-Wahesh told our source in an exclusive statement that the US dollar reaching 8 dinars occurred despite the Central Bank of Libya beginning to settle letters of credit and personal-use allowances. He attributed this rise to a combination of overlapping factors.

Al-Wahesh explained that the Central Bank’s recent measures—particularly its stricter auditing of letters of credit, including reviewing commodity prices and quantities—have reduced the inflow of foreign currency into the market, resulting in a clear decline in supply.

He added that the political division and the lack of clarity in fiscal policy have created uncertainty among market participants, pushing traders and citizens to hedge by holding on to dollars as a store of value, which has increased the demand for foreign currency.

Al-Wahesh pointed out that the expansion of government spending outside traditional financial channels has also contributed to rising pressure on the exchange rate, amid the absence of clear fiscal controls.

He also noted that the large volume of liquidity accumulated in bank accounts—seeking entry into the market—has raised demand for foreign currency, particularly through transactions conducted via bank checks.

Al-Wahesh concluded by stressing that these combined factors have created a wide gap between supply and demand, making the impact of Central Bank measures slow compared to the magnitude of real pressures, and thereby allowing the dollar to continue rising despite the start of settling letters of credit.

Economic expert Mohammed Al-Barghouti confirmed in an exclusive statement to our source that the continued rise in the dollar’s exchange rate comes despite the Central Bank of Libya injecting large amounts of foreign currency through letters of credit and personal-use cards, explaining that market demand remains high and significantly exceeds the available supply.

Al-Barghouti clarified that the reasons behind this rise are multiple, but the most prominent are centered around three main factors. The first is the delay in executing letters of credit and bank cards, as the waiting period for many pending operations has exceeded more than a month without implementation. He pointed out that this delay is linked to oil revenues not being deposited into the Central Bank’s accounts on time, in addition to the auditing and review procedures carried out by K2 on foreign currency movements internally and externally, which has slowed down the execution cycle.

He also noted that seasonal demand in preparation for the months of Ramadan and Eid has contributed to a surge in foreign-currency demand, as traders intensified import operations to cover market needs during this period. This created additional pressure, while the amounts injected by the Central Bank were not sufficient to balance this increase in demand.

Al-Barghouti added that the widening gap between the official exchange rate and the parallel-market rate has encouraged speculation and rapid conversion from the dinar to the dollar in pursuit of profit. This made foreign-currency injections through official channels insufficient on their own to curb the market as long as speculation remains profitable.

The economic expert concluded by emphasizing that these three factors—the delay in execution, the high seasonal demand, and the price gap—constitute the main drivers behind the continued rise in the exchange rate. He stressed that without simultaneous solutions to these underlying causes, the dollar will continue trending upward regardless of how much foreign currency the Central Bank injects.

The Libyan businessman Husni Bey told our source that every economic equation requires clear and responsible decisions. He pointed out that the Central Bank of Libya is obliged to sell a specific amount of dollars at a certain price in order to meet the financial obligations needed to cover the government(s)’ public expenditures, as 93% of public spending is paid in Libyan dinars through selling oil dollars.

This includes salaries, operational expenses, development, and the remaining budget chapters.He explained that the fuel item alone consumes 12 billion dollars—or 33% of Libya’s total production of oil and gas—which is equivalent to 77 billion dinars. Meanwhile, the Central Bank must cover the remaining public spending, valued at more than 135 billion dinars, by selling oil dollars to obtain the required amount of local currency (the Libyan dinar).

Husni Bey added that the dollar has effectively become a commodity sold and exchanged in return for purchasing another “commodity”—the Libyan dinar—in order to obtain the dinars needed to cover public expenditure items, mainly:

Chapter 1 (Salaries): 70 billion dinars

Chapter 2 (Operational expenditures): 14 billion dinars

Chapter 3 (Development): More than 35 billion dinars

Chapter 4 (Child, women, and girls allowances; medical supply; water; health; environment): 18 billion dinars

He questioned, with astonishment, the voices opposing the sale of 20 billion dollars annually to cover 135–137 billion dinars of public spending—while at the same time rejecting the depreciation of the dinar and raising their voices when resorting to foreign currency reserves. He stressed that the figures and the equation are clear, and that the Central Bank is obliged and compelled to sell no less than 20 billion dollars annually to ensure the state meets its basic obligations at an exchange rate of 6.250 LYD per dollar.

Therefore, the shortfall in oil revenues needed to cover 32 billion dollars—12 billion for fuel and 20 billion for the remaining four chapters—places the Central Bank, the government, and the public before three options:

1. Reduce spending and replace subsidies with cash transfers to ensure fair distribution, rationalize consumption, curb smuggling, and stop theft.

2. Lower the exchange rate, accepting inflation, the collapse of the dinar’s purchasing power, and increased poverty.

3. Resort to and spend from the reserves, leading to lower reserves—and stop the shouting.

The Central Bank of Libya stated exclusively to our source that shipments of cash began arriving in Libya today and will be delivered to the Issuance Department at the Central Bank.

These shipments will continue to arrive in the coming period in preparation for distributing cash to branches of commercial banks starting from next December and continuing until Ramadan 2026.

This measure comes to meet the needs of all customers and citizens across all regions of Libya.

The Central Bank of Libya revealed exclusively to our source that the Board of Directors has decided to inject more than $2 billion to cover existing letters of credit and personal-use allocations for commercial banks starting next Monday, the beginning of December.

This measure aims to complete settlements before the end of the year and ensure the availability of goods for the first quarter of next year, ahead of the month of Ramadan.

Our source has exclusively obtained a circular from the Central Bank of Libya addressed to commercial banks and their compliance units regarding the issuance of letters of credit. This follows the bank’s observation of weak compliance with regulatory and supervisory requirements aimed at mitigating risks that banks may face both locally and internationally.

The Central Bank noted that the main issues include the presence of operating licenses that do not match the type of imported goods, along with the failure to provide several documents, including: tax clearance, valid commercial registration, value deduction documents, and proof of using electronic payment methods.

The Central Bank concluded its communication to banks by stating: All instructions must be strictly followed, and the integrity of the procedures for issuing letters of credit must be ensured to avoid negative consequences that could expose the banking sector to local and international reputational risks. Banks in violation will face legal measures against their management.

The Central Bank of Libya revealed exclusively to our source that, following the step to unify development spending today, there is a move towards preparing a unified budget for 2026 after the relevant parties reached an agreement.

According to the Central Bank, this coincides with studying the proposal to cancel the tax on the sale of foreign currency.