The recent announcement by Libya’s central bank regarding a 13.3% devaluation of the dinar has sparked concerns about the country’s economic stability. The new official exchange rate of 5.5677 dinars to the U.S. dollar, effective immediately, marks the first devaluation since 2020 when the rate was 4.48 dinars to the dollar.
Despite the official devaluation, the dinar continues to trade much lower on the parallel market, where the rate has reached 7.20 to the dollar. This discrepancy highlights the challenges faced by Libya’s economy, especially in light of recent political and economic turmoil.
The black market rate has been particularly volatile since September last year, when a power struggle over control of the central bank disrupted oil production and exports, leading to a drop in the currency’s value. The crisis was eventually resolved in September following a U.N.-brokered agreement between rival factions, which resulted in the appointment of a new central bank governor.
In a related development, the speaker of the eastern-based parliament reduced the tax on foreign currency purchases in November, lowering it from 20% to 15%. This tax is an additional cost for individuals buying foreign currencies from commercial banks.
The mounting public debt in Libya is also a cause for concern. The combined government spending for 2024 reached 224 billion dinars, including funds allocated to crude-for-fuel swap deals. Public debt currently stands at 270 billion dinars, with projections suggesting it could exceed 330 billion by the end of 2025 if a unified national budget is not agreed upon.
In response to these challenges, Stephanie Koury, deputy head of the U.N. mission to Libya, has called on the country’s political leaders to urgently establish a spending framework for 2025 with clear limits and oversight mechanisms. This call for fiscal responsibility is crucial for ensuring the long-term stability and prosperity of Libya’s economy.
