Economist Mohsen Drija wrote:<\/p>\n\n\n\n
One of the successful steps taken by the Central Bank of Libya over the past year has been the expansion of payment card usage\u2014something that had been advocated for years. The spread of card usage coincided with a worsening liquidity crisis following the withdrawal of the 20, 50, and 5 dinar banknotes, which increased public acceptance of cashless transactions. This marks an important development in Libya\u2019s buying and selling system, long overdue for wide implementation.<\/p>\n\n\n\n
On the other hand, the spread of card usage enabled access to funds held in banks that were previously, in practice, outside circulation, as using them required paying a significant premium between cash and checks or transfers. This, along with the increase in money supply\u2014both bank deposits and cash in circulation\u2014has driven up demand for foreign currency and contributed to the rise in the exchange rate. Additionally, many activities still rely on cash transactions, such as fuel stations and migrant labor wages.<\/p>\n\n\n\n
Public relief following rising oil prices due to the war on Iran, along with confidence in the availability of U.S. dollar cash and increased allocations for personal purposes, contributed to a decline in the dollar\u2019s exchange rate in the parallel market to levels seen five months earlier, in November 2025. The smaller the gap between the official and parallel exchange rates, the less severe the liquidity problem becomes, as lower dollar prices indicate sufficient supply, returning more cash to banks and improving public confidence in economic conditions.<\/p>\n\n\n\n
Three key factors will shape the exchange rate in the coming period:<\/p>\n\n\n\n
First: Oil prices.<\/strong> Given current spending levels, Libya\u2014producing 1.4 million barrels per day\u2014needs oil prices above $80 per barrel to cover salaries, subsidies, and essential operational expenditures.<\/p>\n\n\n\n Second: Controlling public spending.<\/strong> If the gap between the official and parallel exchange rates disappears due to improved availability of foreign currency, re-export activity will decline. Much of this activity is driven by importing goods using foreign currency credits, then profiting from exchange rate differences\u2014reaching up to 50% in recent periods. Selling imported goods outside Libya at the official rate generates substantial profits in both dinars and dollars, encouraging imports far beyond domestic needs.<\/p>\n\n\n\n Third: Money supply.<\/strong> The total money supply in Libya has exceeded 200 billion dinars, including 59 billion in cash, with the remainder in current account deposits. This large volume significantly increases demand for foreign currency beyond the Central Bank\u2019s ability to meet it at the official rate, especially amid rising spending and public concerns about political and economic stability. Therefore, the Central Bank must halt its growth and work to reduce it, which requires stricter control over public spending.<\/p>\n","protected":false},"excerpt":{"rendered":" Economist Mohsen Drija wrote: One of the successful steps taken by the Central Bank of Libya over the past year has been the expansion of payment card usage\u2014something that had been advocated for years. The spread of card usage coincided with a worsening liquidity crisis following the withdrawal of the 20, 50, and 5 dinar […]<\/p>\n","protected":false},"author":13,"featured_media":256797,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[658,613],"class_list":["post-256793","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-exchange-rate","tag-libya"],"acf":[],"_links":{"self":[{"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts\/256793","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=256793"}],"version-history":[{"count":1,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts\/256793\/revisions"}],"predecessor-version":[{"id":256803,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/posts\/256793\/revisions\/256803"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/media\/256797"}],"wp:attachment":[{"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/media?parent=256793"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/categories?post=256793"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sada.ly\/en\/wp-json\/wp\/v2\/tags?post=256793"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}