{"id":255294,"date":"2025-10-24T00:20:01","date_gmt":"2025-10-23T22:20:01","guid":{"rendered":"https:\/\/sada.ly\/en\/?p=255294"},"modified":"2025-10-24T00:21:03","modified_gmt":"2025-10-23T22:21:03","slug":"al-amin-inflation-in-libya-between-structural-imbalance-and-the-socialist-legacy","status":"publish","type":"post","link":"https:\/\/sada.ly\/en\/al-amin-inflation-in-libya-between-structural-imbalance-and-the-socialist-legacy\/","title":{"rendered":"Al-Amin: “Inflation in Libya Between Structural Imbalance and the Socialist Legacy”"},"content":{"rendered":"\n

Economics professor Anas Al-Amin<\/strong> wrote an analysis titled \u201cInflation in Libya Between Structural Imbalance and the Socialist Legacy.\u201d<\/em><\/p>\n\n\n\n

Although inflation is seen in most economies as a negative phenomenon that weakens purchasing power and disrupts markets, global experience has shown that moderate inflation<\/strong> can actually serve as a tool to stimulate growth<\/strong>\u2014provided it is managed through disciplined monetary and fiscal policies<\/strong>.<\/p>\n\n\n\n

However, in Libya, inflation does not reflect real growth<\/strong>. It is instead the product of institutional chaos<\/strong> and a lack of coordination<\/strong> between economic policies, fed by a socialist mindset<\/strong> that continues to shape both state and societal behavior. Adding to this is a more dangerous phenomenon: speculation on the U.S. dollar<\/strong>, which has turned the foreign exchange market into a source of quick profit rather than a driver of national production.<\/p>\n\n\n\n

Between Theory and Practice<\/strong><\/h3>\n\n\n\n

In major economies, inflation has been used as a means of stimulating recovery<\/strong> after crises.<\/p>\n\n\n\n

    \n
  • In the United States<\/strong>, the Federal Reserve injected liquidity into the banking system following the 2008 crisis through quantitative easing (QE)<\/strong>, temporarily raising inflation but reviving economic activity.<\/li>\n\n\n\n
  • In Japan<\/strong>, the Abenomics<\/em> policy targeted 2% inflation<\/strong> to break a long deflationary period.<\/li>\n\n\n\n
  • The European Union<\/strong> also adopted expansionary monetary policy after the COVID-19 pandemic to avoid recession.<\/li>\n<\/ul>\n\n\n\n

    These examples demonstrate that inflation is not always an economic disease<\/strong>\u2014it can serve as a remedy<\/strong>, but only when there are strong institutions<\/strong> and sound economic governance<\/strong>.<\/p>\n\n\n\n

    Arab Experiences: Morocco and Jordan as Models<\/strong><\/h3>\n\n\n\n

    In the Arab world, some resource-limited countries have managed to control prices<\/strong> despite external challenges.<\/p>\n\n\n\n

      \n
    • In Morocco<\/strong>, the Central Bank successfully kept inflation within 2\u20133%<\/strong>, thanks to an inflation-targeting policy<\/strong> and coordination between monetary and fiscal policies<\/strong>.<\/li>\n\n\n\n
    • In Jordan<\/strong>, the stability of the dinar\u2019s exchange rate<\/strong> and the government\u2019s commitment to fiscal discipline<\/strong> helped protect the economy from imported inflationary shocks.<\/li>\n<\/ul>\n\n\n\n

      These two cases show that monetary stability doesn\u2019t require oil wealth<\/strong>\u2014it requires institutional credibility<\/strong> and coordinated decision-making<\/strong> in economic management.<\/p>\n\n\n\n

      The Libyan Case: Inflation Without Policy Tools<\/strong><\/h3>\n\n\n\n

      In contrast, the Libyan economy suffers from unproductive inflation<\/strong>, resulting from the absence of effective monetary policy tools<\/strong>.<\/p>\n\n\n\n

      The Central Bank of Libya<\/strong> lacks real control over money supply<\/strong> and interest rates<\/strong>, operating under a dual exchange rate system<\/strong>\u2014official and parallel.<\/p>\n\n\n\n

      This environment has fostered speculation and corruption<\/strong>, eroding confidence in the Libyan dinar<\/strong>. As a result, Libya faces cost-push inflation<\/strong> driven by currency instability<\/strong>, not by an increase in production<\/strong> or demand<\/strong>.<\/p>\n\n\n\n

      Speculation on the Dollar: The Hidden Fuel of Inflation<\/strong><\/h3>\n\n\n\n

      One of the main causes of inflation in Libya is foreign currency speculation<\/strong>.
      Those who possess foreign exchange\u2014whether traders, powerful entities, or ordinary citizens seeking to protect their savings\u2014buy and hoard dollars or resell them in the parallel market<\/strong> for quick profits.<\/p>\n\n\n\n

      These practices create artificial demand<\/strong> for dollars and continuously push its price upward.
      This, in turn, raises the cost of imports<\/strong>, leading to higher prices for goods and services in the local market.<\/p>\n\n\n\n

      The gap between the official and parallel exchange rates<\/strong> has also created fertile ground for speculation.
      Some importers<\/strong> and officials<\/strong> exploit this gap by diverting foreign currency from letters of credit<\/strong> into the black market<\/strong>.<\/p>\n\n\n\n

      Instead of channeling foreign exchange toward productive imports<\/strong> or real investment<\/strong>, it has become a tool for quick financial gain<\/strong>, turning Libyan inflation into both monetary<\/strong> and speculative inflation<\/strong>.<\/p>\n\n\n\n

      This type of inflation weakens the economy<\/strong>, as it generates no added value<\/strong>, fails to stimulate production<\/strong>, and deepens rentier dependency<\/strong> while worsening the fragility of the national currency.<\/p>\n\n\n\n

      Fiscal Dependence and the Persistence of Oil Rent<\/strong><\/h3>\n\n\n\n

      Libya\u2019s public finances<\/strong> remain heavily dependent on oil revenues<\/strong>, amid a weak tax system<\/strong> and an inability to manage domestic demand<\/strong>.<\/p>\n\n\n\n

      Whenever oil prices fall, inflation<\/strong> and fiscal deficits<\/strong> re-emerge\u2014exposing the structural fragility of an economy reliant on a single source of funding, with no productive alternatives.<\/p>\n\n\n\n

      The Socialist Legacy: A Mindset That Fuels Inflation<\/strong><\/h3>\n\n\n\n

      Inflation in Libya cannot be separated from the socialist legacy<\/strong> entrenched over decades.
      The prevailing economic mentality still holds the state responsible<\/strong> for providing jobs, income, and subsidies, while viewing the private sector with suspicion<\/strong>.<\/p>\n\n\n\n

      This legacy has produced three major problems:<\/p>\n\n\n\n

        \n
      1. Overdependence on public sector employment<\/strong>.<\/li>\n\n\n\n
      2. Weak culture of production and entrepreneurship<\/strong>.<\/li>\n\n\n\n
      3. Resistance to price liberalization and competition<\/strong>.<\/li>\n<\/ol>\n\n\n\n

        As a result, every rise in prices is met with calls for increased subsidies<\/strong>, creating a vicious inflationary cycle<\/strong> that is difficult to break.<\/p>\n\n\n\n

        Consequences of Uncontrolled Inflation<\/strong><\/h3>\n\n\n\n
          \n
        • Erosion of citizens\u2019 purchasing power.<\/li>\n\n\n\n
        • Expansion of the parallel market<\/strong> and decline of the formal economy<\/strong>.<\/li>\n\n\n\n
        • Capital flight and loss of confidence in the national currency.<\/li>\n\n\n\n
        • Rising poverty rates<\/strong> and social inequality<\/strong>.<\/li>\n\n\n\n
        • Decline in domestic production<\/strong> and long-term investment<\/strong>.<\/li>\n<\/ul>\n\n\n\n

          Reforming the Mindset Before the Numbers<\/strong><\/h3>\n\n\n\n

          Inflation in Libya is not merely a monetary imbalance<\/strong>\u2014it is a crisis of economic culture and institutions<\/strong>.<\/p>\n\n\n\n

          Without genuine independence for the Central Bank<\/strong>, tax system reform<\/strong>, gradual exchange rate liberalization<\/strong>, and control over dollar speculation<\/strong>, inflation will remain an erosive, not stimulative<\/strong>, force.<\/p>\n\n\n\n

          The biggest challenge lies not only in policy but in changing the economic mindset<\/strong>: shifting from state dependence<\/strong> to building a productive economy<\/strong> driven by citizens and the private sector<\/strong>.<\/p>\n\n\n\n

          Ultimately, the strength of a currency<\/strong> is not measured by the amount of oil a country possesses\u2014but by the trust<\/strong>, institutions<\/strong>, and modern economic thinking<\/strong> it upholds.<\/p>\n\n\n\n

          <\/p>\n","protected":false},"excerpt":{"rendered":"

          Economics professor Anas Al-Amin wrote an analysis titled \u201cInflation in Libya Between Structural Imbalance and the Socialist Legacy.\u201d Although inflation is seen in most economies as a negative phenomenon that weakens purchasing power and disrupts markets, global experience has shown that moderate inflation can actually serve as a tool to stimulate growth\u2014provided it is managed […]<\/p>\n","protected":false},"author":13,"featured_media":255295,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[683],"tags":[926,613],"class_list":["post-255294","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economic-articles","tag-inflation","tag-libya"],"acf":[],"_links":{"self":[{"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts\/255294","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/comments?post=255294"}],"version-history":[{"count":3,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts\/255294\/revisions"}],"predecessor-version":[{"id":255298,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts\/255294\/revisions\/255298"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/media\/255295"}],"wp:attachment":[{"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/media?parent=255294"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/categories?post=255294"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/tags?post=255294"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}