Economist \u201cHusni Bey\u201d recently wrote an article on the ongoing debate surrounding Libya\u2019s monetary policy economic crisis. He agrees that applying traditional economic theories to Libya’s rentier economy, institutional fragmentation, uncontrolled public spending, deficit financing, and money supply inflation does not address the root of the problem.<\/p>\n\n\n\n
The economy cannot wait for politics to be fully formed; economic realism does not mean postponing decisions but making possible ones and weighing their costs against inaction.<\/p>\n\n\n\n
If the official exchange rate diverges from the equilibrium dictated by dinar supply and dollar demand, another parallel market rate emerges. The wider this gap becomes, the more it encourages profit-seeking speculation and speculative demand for dollars not linked to imports or production but instead driven by price differentials.<\/p>\n\n\n\n
The real question is: What price should be charged? And through what mechanism should these sales occur?<\/p>\n\n\n\n
The issue is not whether to sell the dollar or not, but at what price and via what mechanism. The key is whether this process narrows the gap between official and parallel rates or exacerbates it.<\/p>\n\n\n\n
The exchange rate itself may be a symptom of deeper issues, such as continued public spending exceeding available revenue and resources, leading to more dinars created to finance these expenditures. This process creates additional demand for foreign currency due to speculative activities driven by price differences rather than actual need.<\/p>\n\n\n\n
A dual approach is necessary: Controlling public spending and ending deficit financing simultaneously with reforms in exchange rate mechanisms and transparent foreign currency sales channels, which should help narrow the gap between official and parallel rates. This will also reduce speculative profits over time.<\/p>\n\n\n\n
While political division may delay action, economic reality does not permit postponement indefinitely. Failing to make a decision comes at a cost, dollar devaluation for the dinar and diminished investment opportunities for the Libyan economy.<\/p>\n\n\n\n
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Economist \u201cHusni Bey\u201d recently wrote an article on the ongoing debate surrounding Libya\u2019s monetary policy economic crisis. He agrees that applying traditional economic theories to Libya’s rentier economy, institutional fragmentation, uncontrolled public spending, deficit financing, and money supply inflation does not address the root of the problem. However, he disagrees with managing the crisis until […]<\/p>\n","protected":false},"author":13,"featured_media":257817,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"iawp_total_views":0,"footnotes":""},"categories":[683],"tags":[1171,613],"class_list":["post-257815","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economic-articles","tag-economic-crisis","tag-libya"],"acf":[],"yoast_head":"\n