Banking expert Nouman Al-Bouri argues that the liquidity crisis in Libya cannot be resolved by imposing withdrawal limits. People should be allowed to access the funds they need as long as their accounts cover the requested amounts.
Imposing withdrawal restrictions only opens the door to the black market, creating opportunities for illicit profits. Conversely, if citizens are confident that they can withdraw their money whenever needed, they will not overdraw out of fear or anxiety. Restrictions encourage cash hoarding and avoidance of the formal banking system.
Closing physical markets like Souq Al-Mushir will have little impact on the parallel currency market, particularly when there is a significant gap between the official exchange rate and the real market rate. Today, currency trading occurs online through forex platforms and messaging apps, making physical closures largely ineffective. Such measures could even negatively impact the Libyan dinar rather than stabilizing it.
To effectively tackle the black market, the Central Bank must address the root causes, not just the symptoms. Key steps include:
Stopping government financing through money creation or deficit coverage outside actual revenues.
Establishing a realistic and balanced exchange rate that supports budget financing and meets foreign currency demand.
Lifting all restrictions on foreign currency purchases, allowing citizens to buy currencies as long as they can verify the source of their funds and the intended recipient.
Cooperating with the Tax Authority to ensure individuals and businesses pay taxes on earned income.
Permitting the use of all legal payment methods, both domestic and international.
For example, if a Libyan citizen wants to buy property abroad worth one million dollars, holds the equivalent in dinars, and has paid local taxes, they should be allowed to purchase the necessary foreign currency. Restricting this only fuels the black market and encourages illegal activity, as has been seen for decades.
On electronic payments:
Encouraging the use of electronic payments is a positive step. However, for banks and payment companies to invest in developing their platforms, there must be clear financial incentives. Providing electronic payment services with minimal profit margins discourages investment and innovation in the sector.
The market should be left to consumers to choose the best services, while providers compete to offer advanced, efficient solutions. Banks and payment companies are profit-driven, and they will not invest in systems that fail to deliver a real economic return.
