The Libyan local currency (the dinar) was hit after it lost more than 75% of its value over 7 years, according to the statistics of the Central Bank.
This comes after the “Central” reduced the value of the dinar for the first time since 2020 by 13.3% against foreign currencies, at a time when the country’s economy suffers from structural imbalances and shrinking in purchasing power, real income value and the size of liquidity, as well as high levels of inflation, according to observers.
The bank justified the imposition of the tax and the reduction of the value of the local currency with the high bill of spending in the east and west, as the volume of the two governments spending last year exceeded the barrier of 224 billion dinars (approximately 46 billion dollars), which deepened the public debt gap to reach 270 billion dinars (55.7 billion dollars).
The Libyan Central expected that the financial gap would expand to exceed the level of 330 billion dinars (68 billion dollars) by the end of the current year, in the event that a unified budget is not approved.
However, the references of Ghaith, the former Undersecretary of the Ministry of Finance, the former member of the Board of Directors of the “Central”, considered – in his statement to Al -Jazeera Net – that the bank’s justifications for which the decision to amend the exchange rate does not fall within its competencies, but rather is one of the responsibilities of the government that must stop expanding public spending, indicating that the timing of the decision is not appropriate for the current economic situation and the erosion of the value of the dinar.
Ghaith pointed out that the public debt is a burden resulting from the policies of the government, and not the responsibility of the central bank, which should stop facilitating the government’s obtaining funding indirectly.
In turn, the professor of economics and economic analyst Ali Al -Solh confirmed that the “central” definition of a exchange rate exceeds the real equivalent price formed a starting point for the financial domination of the government, which led to the bank’s loss of the independence of its monetary decision, according to a statement to Al -Jazeera Net made by the conciliation.
Steel tax
Munther Al -Shehoumi, economist, investment director of Pearls Capital, has a different look, as he indicated – in his interview with Al -Jazeera Net – that the “central” decision – despite the direct social costs it carries as a result of the decrease in purchasing power – in essence an emergency and courageous option in the absence of realistic alternatives in the short term, according to his description.
But he considered it the decision as a “temporary residence”, without comprehensive financial reforms, the dinar will remain vulnerable to sharp fluctuations, and the citizen will pay the price again after time.
On the question of Al -Jazeera Net about whether the Libyan Central Central could address the crisis without resorting to reducing the value of the dinar, Al -Shehoumi said, “Yes, it was possible to alleviate the crisis if it was anticipated with a bold reform package.”
Al -Shehoumi talked about:
- The introduction of unacceptable real estate assets into the economic cycle through a legal settlement and new urban planning can form a huge real estate wealth.
- Attracting the monetary block outside the banking system and converting it into investment tools.
- Improving the customs and tax collection system.
- Diversifying public revenue sources in local currency away from oil prices fluctuations.
Price
With regard to the price difference between the dollar in the official and parallel market, Ghaith said that the black market does not exist the dollar from nothingness, but rather feeds on it as a result of poor control over the mechanisms of foreign exchange use, whether through documentary credits or what is known as the personal purposes that have already turned into a currency trading channel.
In the context, one of the currency traders on the black market – which has been mentioned in his name – said to Al -Jazeera Net that the purchases have become linked to the dollar price in the parallel market, because the official price of the central bank is not available to any merchant. Based on these data, the value of each merchandise is determined according to the dollar price in the parallel market.
He pointed out that determining the dollar exchange rate against the dinar in the parallel market depends on the “central” of the currency, whether it was through the credits or the personal purposes, according to his saying.
And on the position of the House of Representatives, which was imposed in November 2024, a tax on foreign currency purchases by 20%, Parliament MP Abdel Moneim Al -Arfi – to Al Jazeera Net – said that changing the exchange rate is an authentic jurisdiction for the central bank, and therefore Parliament will hold a session on the 15th of November 1 with the governor of the bank Naji Issa and members of its board of directors to explain the reasons and repercussions of the “central” taking a tax on cash sales Foreign and thus reduce the value of the dinar.
The session will also discuss the future of the Libyan dinar and the economic situation of the country, noting that Parliament had temporarily imposed a tax last year and led to relatively positive results.
With regard to the measures to restore confidence in the economy, the conciliation believes that this requires:
- Integrated coordination between economic, financial, commercial and monetary policies.
- Determine the total demand volume that the central can defend the value of the currency.
- Opening the clearing system and determining the optimal volume of the circulating monetary mass.
Al -Solh stresses that the central point is the necessity of linking wages and salaries to the real price of the currency, in addition to starting to process the fuel support file.
Urgent repairs
As for the urgent treatments that the central bank should make to save the economy, Al -Shehoumi called for curbing public spending, especially in the salary and support, reducing the administrative apparatus, rationalizing external spending, and turning support into a critical system directed as the only way to curb the financial deterioration.
Al -Shehoumi believes that achieving monetary stability in the short term requires the “central” to enhance monetary policy tools, improve liquidity management, and control foreign exchange rates.
The long -term solution – according to Al -Shehomi – comes in re -seizing public finances, starting from rationalizing the salary door that consumes the largest part of public spending, to restructuring the support system and replacing in -kind support with directed cash support, according to his statement.
What about floating the dinar?
On the scenario of floating the dinar, Ghaith said: The reality indicates that the central bank is chasing the black market, and if this is the case, it must be submitted to float the local currency to determine its price according to the mechanisms of supply and demand.
However, the float, in light of the current circumstances that are characterized by the control of the central bank on foreign exchange and its only source, is an unrealistic and inappropriate option in the current context.
How can the rest of the dinar rescue?
Al -Shehoumi economist – Al -Jazeera Net – stressed that saving the dinar is not only with monetary decisions, but by stimulating real economic growth. Libya needs to reactivate its productive sectors, especially the transforming oil industries, which increases national income and enhances foreign exchange reserves.
Also, controlling the financial deficit – through stopping spending with deficit or inventory it by a rate not exceeding 5% of the gross domestic product and within the framework of development projects – will have a direct impact on the stability of the exchange rate, according to his statements.
Al -Shehoumi also called for a reduction in the width of the money in line with the size of the current economy, which is a necessary measure to reduce inflation and restore market confidence.
