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With Details: Al-Safi: “The New Leadership of the Central Bank Relies on a Strategy of Providing Market-Reassuring Information”

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Economic expert Mohamed Al-Safi published an article on his page, discussing the use of information as a monetary tool in Libya.

When monetary tools are mentioned, discussions often focus on traditional instruments such as interest rates or exchange rates. However, positive and disciplined communication with the market is an equally significant monetary tool.

The new leadership of the Central Bank of Libya has begun to clearly demonstrate its characteristics, effectively employing one of the strongest monetary tools at its disposal: good communication and information dissemination.

The new management relies on a strategy of delivering information that reassures the market, leveraging the principle that “capital is cowardly” to steer it away from speculative markets and reduce speculators’ impact on the Libyan economy. This strategy is not limited to information sharing but extends to restoring trust through consistent decision-making and defending those decisions in practice. The alignment between declared policies and their transparent implementation fosters confidence in the institution, signaling that the Central Bank has a clear plan and is determined to execute it.

This approach marks a departure from the previous management, which often caused market anxiety and used information negatively (e.g., raising the red flag in 2015), destabilizing the market. In contrast, the current leadership employs realistic reassurance as a tool to prevent market chaos.

Exchange Rate Messages as a Model for Monetary Communication
Messages concerning exchange rates are a prime example of using communication as a monetary tool. The Central Bank has conveyed clear signals about its intention to lower the exchange rate, reducing incentives for capital that had previously engaged in speculative dollar trading for profit. This strategy lessens artificial demand for the dollar as a speculative commodity and promotes its real use for trade and imports.

Liquidity Management and New Banknote Announcement
Regarding liquidity issues, announcing the printing of new banknotes might encourage those holding large sums outside the banking system (so-called “under the mattress” savings) to deposit these funds in banks, fearing future difficulties in using them. This measure could reintegrate part of the money circulating outside the banking system into the official economic cycle.

Challenges to Success
Despite its promising approach, there are risks that could hinder these policies, including:

  1. A decline in oil revenues might weaken the Central Bank’s ability to defend the current exchange rate unless reserves are utilized.
  2. Any disruptions in electronic payment systems or delays in printing new currency could undermine trust in the Bank’s ability to execute its strategy.

Conclusion
Relying on information as a monetary tool reflects a strategic shift in the Central Bank’s management. The aim is to build trust, reduce speculation, and steer the economy toward stability. However, achieving complete success requires addressing external challenges and enhancing coordination between monetary and fiscal policies.

Economic Expert Ibrahim Wali: The Central Bank of Libya Today

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The economic expert Ibrahim Wali authored an article discussing the Central Bank of Libya, emphasizing that the institution is far more than just a governor, deputy governor, and staff. It represents a collective of minds with scientific knowledge and extensive expertise in monetary, economic, commercial, and legal matters. Operating as a structured institution, the bank possesses wide-ranging powers and independence, enabling it to fulfill its purpose in line with global standards for central banks. This equips it to monitor and adapt to developments in central banking both locally and internationally.

Wali highlighted the increasing global trend toward ensuring the independence of central banks, particularly when coupled with patriotism and competence. He underscored the importance of merit-based appointments in central banks, devoid of the scourge of nepotism, selecting individuals with comprehensive knowledge and extensive experience in banking, especially in central banking operations.

He also stressed that expertise in other economic, monetary, financial, and legal areas is essential. Globally, central bankers view managing a central bank as an art form, requiring not only knowledge but also inherent talent honed through learning and experience. This blend of talent, independence, and informed decision-making has been the cornerstone of the success of renowned central banks, whose decisions and announcements are closely monitored by millions worldwide.

Unfortunately, Wali lamented, since the Central Bank of Libya was stormed by military forces, it has become a playground for opportunists, power brokers, and fraudsters. The bank, once a pillar of the Libyan banking system, has lost its prestige and respect. This decline is not limited to the institution itself but extends to its governor, board members, and employees, who face immense pressures and threats from those who disregard banking laws and the objectives of the Central Bank.

He argued that it is time to free the Central Bank of Libya from these intrusions and government interference, while ensuring harmony and coordination among monetary, fiscal, and trade policies. He specifically criticized the “dormant Ministry of Economy” and called for monetary policies that align with broader economic goals.

Wali stressed the urgency of allowing the Central Bank to independently make decisions regarding the regulation of the banking profession, liquidity management, exchange rate monitoring, and the improvement of banking services for ordinary citizens.

Moreover, he advocated for reforming the Central Bank’s human resources systems, offering financial and non-financial incentives to attract top talent. Without such changes, Wali warned, the bank risks losing its governor, board members, employees, and the entire Libyan banking sector, potentially reverting to outdated and ineffective practices—a scenario he hoped to avoid.

Exclusive: The Central Bank Sends 50 Million to Benghazi to Support Sahara Bank and North Africa Bank Treasuries

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The Central Bank of Libya exclusively revealed to our source that a flight has just departed from Tripoli to Benghazi carrying a cash shipment valued at 50 million dinars. Of this amount, 20 million has been allocated to support the treasuries of Sahara Bank branches in the city, and 30 million is designated for North Africa Bank branches.

This initiative was undertaken under the directives of the Governor of the Central Bank of Libya, Nagy Issa, and his deputy.

Exclusive: The Central Bank Issues Regulations to Facilitate Salary Disbursement Before Reaching Banks – Details Below

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Our source has obtained a circular issued by the Central Bank of Libya to commercial banks regarding regulations for setting purchase limits based on individual salaries. The goal is to facilitate salary disbursement before funds are deposited into banks and to promote electronic payments.

The regulations stipulate that banks must establish purchase limits through electronic payment services they offer, such as electronic cards or mobile applications.

The limit granted to customers is considered a form of Qard Hasan (interest-free loan) and is subject to all its rules, terms, and Sharia-compliant regulations. Key conditions include:

  • No commissions, whether fixed or percentage-based, are to be charged on the overdraft amount.
  • Customers must not be required to subscribe to additional services to receive the limit.

The service is to be offered upon customer request through bank-specific mobile applications, SMS services, or signed forms that outline all product terms and conditions, approved by the bank’s Sharia supervisory board.

Each bank is required to establish policies and regulations for the service, including identifying target beneficiaries, service terms, and the procedures needed to safeguard the rights of both the bank and its customers. Banks may impose conditions for eligibility, restrict usage cases, set specific loan ceilings, or link the limit to the salary value, provided these conditions do not conflict with the bank’s financial policies or legal regulations.

The service is available to bank customers with active current accounts who have been receiving regular salary deposits for at least six months.

The granted limit must not exceed 60% of the net salary after deducting any installments or obligations. The used amount is automatically deducted from the limit when the salary is deposited, and the limit is renewed automatically unless either party decides otherwise.

The bank’s board of directors and Sharia supervisory board must approve the policies, product guidelines, terms, and models, ensuring compliance with regulations issued by the Central Bank of Libya.

Banks are also authorized to take all necessary technical and legal measures to recover their dues in cases where customers fail to prove insolvency. Additionally, banks may refuse to provide a Qard Hasan to clients with a history of defaults or other issues, as determined by approved policies and regulations to mitigate risks.

In light of this, the Central Bank has urged commercial banks to launch the product and prepare their systems to enable the use of these limits for electronic payment transactions in compliance with the aforementioned terms and regulations.

Exclusive: Central Bank Sends 10 Million Dinars to Ubari

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The Central Bank of Libya exclusively revealed to our source that a plane carrying a cash shipment of 10 million dinars took off moments ago from Tripoli Airport heading to Ubari in southern Libya.

Of this total, 4 million dinars are allocated to the National Commercial Bank, 3 million dinars to the safes of the North Africa Bank branches, and 3 million dinars to the Republic Bank.

Exclusive: Central Bank Sends 10 Million to Commercial Banks in Ghat

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The Central Bank of Libya exclusively revealed to our source that a plane carrying a cash shipment of 10 million dinars took off moments ago from Tripoli Airport heading to Ghat.

Of the total amount, 6 million dinars are allocated to the National Commercial Bank, and 4 million dinars to the safes of the North Africa Bank branches. The Central Bank will continue to distribute cash in the coming days and weeks according to a well-organized plan with scheduled flights.

This comes after assessing the cash needs of customers at commercial bank branches. Following the directives of Governor Nagy Issa, the Central Bank of Libya has started distributing cash shipments to replenish bank branches across Libya.

Exclusive: Al-Jabo Comments on Salaries, Urges the Central Bank to Transfer Wages to Beneficiaries’ Accounts

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Economic advisor Wahid Al-Jabo, in an exclusive statement to Sada Economic, said: “If the Ministry of Finance has prepared and directed the salaries on time with lists of state employees’ names, the Central Bank of Libya must transfer the salaries to the beneficiaries’ current bank accounts.”

He added, “However, if the allocations for Chapter One [salaries] have been exhausted, the Ministry of Finance should seek permission from the Central Bank to cover the salaries.”

Al-Jabo also noted that the halting of oil production and export in recent months might have had a negative impact on the Central Bank’s financial inflows, leading to salary delays. He emphasized the importance of clarifying the reasons for the salary delays between the Ministry of Finance and the Central Bank of Libya.

Exclusive: Central Bank to Sada: No Revenues Received for Months, October Salaries Funded by a Loan from Us

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The Central Bank of Libya exclusively informed Sada Economic about recent developments regarding salary disbursements.

It revealed that no revenues have been transferred to the bank for months as of today, November 25, to cover salaries. As evidence, the Central Bank financed October’s salaries through a loan from its own resources.

Exclusive: Central Bank Source: “We Continue to Support the Dinar’s Value… and Here Are the Upcoming Possibilities”

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A source at the Central Bank of Libya exclusively revealed to Sada Economic that the bank continues its efforts to support the value of the Libyan dinar.

The source added that all possibilities are on the table, including a further reduction in the foreign exchange tax or its complete elimination by the end of the year.

Exclusive: “Al-Harati” Comments on the Decision to Reduce the Exchange Rate Fee

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Legal advisor Hisham Al-Harati stated exclusively to Sada Economic Newspaper: “The methodology adopted in drafting the decision to reduce the fee imposed on the exchange rate clearly indicates that the dinar’s value will remain stable at this level, likely at least until mid-next year.”

He added, “The decision uses wording that circumvents judicial rulings on the matter and presents it as an independent new decision unrelated to previous ones. Additionally, the change in the fee value is contingent on the Central Bank’s ability to meet its obligations, which requires sufficient time to achieve the necessary balance for the adjustment.”

In a Statement to Sada: Husni Bey Reveals Central Bank Reserves and the Fate of the Dinar

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Libyan businessman Husni Bey stated in an exclusive comment to our source:
“The Central Bank of Libya undoubtedly has the capacity to defend the dinar at any rate it deems appropriate. The bank possesses gold and currency reserves exceeding $90 billion (with gold reserves over $10 billion and dollar reserves amounting to $80 billion). These high reserve levels allow the Central Bank to safely reduce the dollar exchange rate to below 5.000 LYD, thereby strengthening the purchasing power of the Libyan dinar.”

He added: “Let us conduct a simple simulation. It can be said that the official and parallel exchange rates could drop by 250 dirhams for every 5% reduction in the fee. The Central Bank can defend the dinar at around 5.000 LYD/USD, even if this requires using up to $5 billion in reserves annually, with an oil price of $75 per barrel for several years.”

From the consumer’s perspective, Bey explained, a reduction in the exchange rate positively impacts prices and services in the medium and long term. Such a reduction could pressure the prices of durable and consumable goods to decline over time. However, in the short term (3 to 6 months), it may cause some disruptions.

In the short term, Bey highlighted that exchange rate reductions could create distortions in the overall economy, leading to losses for many service providers and suppliers. This may also reduce supply, causing an imbalance between supply and demand, which could temporarily drive prices up instead of down due to traders’ reluctance to lower prices.

However, he emphasized that prices will stabilize and decrease in the medium and long term, likely beyond seven months. Economic balance is always governed by the “supply and demand” equation—if supply decreases, prices will rise even if the exchange rate drops.

Regarding the phased reduction of the fee by 5% or its potential cancellation by the end of the year, Husni Bey noted that this creates uncertainty among traders and speculators. As a result, traders may hesitate to import, and suppliers may cease deliveries, leading to reduced availability of durable and consumable goods. This decline in supply, coupled with steady demand, could drive prices up in the short term, further fueling inflation for 3 to 6 months.

He elaborated: “The mere suggestion of reducing the fee by 5% since mid-October 2023 and talks about canceling it entirely by 15% at the end of December 2023 alarm suppliers, discouraging them from taking risks. This is expected to shrink imports, with losses of around 5% by December 2024 and up to 15% in the first quarter of 2025 for those importing now at a fee-inclusive rate of 15%.”

In conclusion, he stated: “Reducing the exchange rate or the fee remains positive in the medium and long term (beyond seven months), even if it has negative effects in the short term, up to six months. The success or failure of monetary policies ultimately depends on fiscal policies and government spending. The government must avoid ‘expanding public spending,’ ‘financing budgets through deficits,’ and should adhere to the Central Bank’s monetary policies to defend the exchange rate determined by its board of directors.”

He concluded by saying: “My personal opinion is that the ideal rate the Central Bank can defend without depleting reserves is 6.000 LYD/USD. If public revenue is supported through reserves, the Central Bank could defend a rate below 5.000 LYD/USD, provided oil production exceeds 1.3 million barrels per day, gas production surpasses 1.4 billion cubic feet per day, and oil prices remain above $75 per barrel.”

Exclusive: The Central Bank Begins Implementing Parliament’s Decision to Reduce the Foreign Exchange Tax to 15%

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Our source has exclusively obtained a circular from the Central Bank of Libya regarding the Parliament’s decision to reduce the tax by 5%, bringing it down to 15%.

The Central Bank also emphasized the need to streamline procedures for opening letters of credit for all purposes, goods, and services.

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Al-Shhibi: “Clearing Between Central Bank Branches in Tripoli and Benghazi Exceeds the Board’s Authority – Here’s Why”

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Banking expert Dr. Houssem Al-Shhibi commented on his official Facebook page regarding the decision of the Central Bank of Libya’s Board of Directors to activate a unified clearing system between its Tripoli and Benghazi branches.

He stated that this decision, made at the Board’s first meeting, is a positive indicator of the Board’s intent to repair damage caused by political divisions over the past decade. However, he noted several points:

“First: This decision has been repeatedly announced on various occasions, most notably following the formation of the Government of National Unity and a meeting between Mr. Al-Hibri and Mr. Al-Kabeer, but it has not yet been implemented.

Second: Benghazi has two systems within the Central Bank. The first is the original system housed at the branch on Agency Street, separated from the main system by Mr. Al-Kabeer in 2014 for political reasons. While this system can be reactivated, it only reflects the bank’s accounts as they were in 2014.

The second system was created after the division and operates independently of Tripoli’s system, accurately reflecting Benghazi’s Central Bank budget, including bank balances.

Third: Merging the two systems, or in accounting terms, consolidating the two banks’ budgets, faces technical issues due to differences between Benghazi’s and Tripoli’s general ledger and accounting systems.

Additionally: While it may seem like a simple banking measure, achieving clearing unification actually exceeds the Central Bank’s authority. For effective clearing, bank balances must be transferred from Benghazi’s budget to Tripoli’s, which would require shifting corresponding debt items into Tripoli’s budget. The issue is that the banks’ balances at Benghazi’s branch are offset by a public debt exceeding 90 billion dinars. This consolidation requires political willingness from both sides of the political divide to unify and legitimize this debt as a single Libyan public debt.”

He added: “Historically, I was assigned after the Geneva Agreement and the establishment of the Government of National Unity to follow up on this matter, but I found no political will to take this step. I believe this decision goes beyond the capabilities and mandate of the Central Bank’s Board of Directors. I hope the political decision-makers, especially the House of Representatives and the State Council, assume their responsibilities to allow the Board to fulfill its duties and deliver the long-awaited results to citizens.”