Nisreen Suleiman – “Al-Quds Al-Arabi”
The sudden and unprecedented rise in the exchange rate of the US dollar against the Libyan dinar has sparked widespread public concern and fears of the repercussions of this rise on the citizen’s cost of living, amid questions about the reasons for this rise in the oil-exporting country.
Recently, the price of the dollar in the parallel market exceeded the barrier of 7 Libyan dinars per dollar, after its price had stabilized for years at 5 dinars per dollar.
The failure of the Central Bank of Libya to provide hard currency on a regular basis, in addition to its fluctuation in opening credits in the period from October to January of this year, and the cessation of credits and the complete provision of hard currency during the year 2024, caused an increase in the price of the dollar on the black market due to… It is not available from official sources, which makes the merchants the ones who control its management.
The Central Bank’s suspension of credits and its irregular provision of hard currency stopped deposits from businessmen in banks, making Libya experience a liquidity problem that it has not witnessed for years. While many bank customers, especially merchants, were unable to withdraw their money in cash, which prompted them to buy hard currency to provide the funds they needed.
All of these reasons caused the rise in the dollar exchange rate to double, coinciding with doubts about the government’s performance, as economists confirm that the rise of the dollar will continue until the Central Bank opens credits and charges the hard currency card again.
Although the Central Bank provided an alternative solution, which was to open a system to provide a value of 4,000 thousand dollars, this could not solve the crisis, but rather doubled it, as the demand for hard currency increased, while the Central Bank was unable to respond to this pressure, which contributed to strengthening the black market even more.
Temporary solutions
As a temporary solution, as we mentioned previously, at the beginning of last February, the Central Bank of Libya granted banks the authority to decide on requests to sell foreign currency for personal purposes using the national number of every Libyan citizen aged 18 years or older after fulfilling the requirements for reserving foreign currency for personal purposes.
The bank stipulated that the maximum amount sold per person through all banks operating in Libya be $4,000 or its equivalent in other currencies.
He explained the possibility of considering changing it later, provided that a bank account is managed by the bank through which the sale is made and that the account covers the value of the currency sold at the time.
The bank indicated that the use of the account should be in accordance with issuing and charging cards, or opening accounts in foreign exchange for citizens to deposit the purchased currency in accordance with Law No. (1) of 2005 regarding banks and its amendment. And enabling them to use it or transfer it to another account, whether for individuals or legal entities.
He also pointed to the permission to allow individuals and legal entities to purchase foreign currency in citizens’ foreign exchange accounts allocated under this circular and accumulate it without a specific ceiling within the Libyan banking sector.
In order to purchase foreign currency in citizens’ accounts, it is required to use it for the purposes specified in this circular, in addition to converting it by making quick transfers in foreign currency if it is available in the bank.
Regarding the purchase of foreign exchange for the purposes of opening documentary credits, the Central Bank granted banks the authority to decide on requests to open documentary credits for all goods and services that are legally permitted to be imported, provided that a valid “CBL” banking code is available.
The Central Bank stressed the need for all banks to exercise due diligence to ensure the accuracy of the data related to the entity requesting the opening of the documentary credit, and that there are no reasons preventing them from continuing to deal with it before starting the procedures for opening the documentary credit.
He pointed out the necessity of notifying the documentary credit only after purchasing the foreign currency to cover the documentary credit.
He noted that the maximum value of a single service documentary credit should be $2 million, commercial credit should be $3 million, and industrial credit should be $7 million, or its equivalent in other currencies.
The Central Bank pointed out that the value of the existing documentary credits for each party should be taken into account when granting approval, and in any case the documentary credit shall not be divided for the supply of industrial goods whose value exceeds the aforementioned amount.
Financial analyst Suleiman Al-Shahoumi says that the Central Bank is the only supplier of the dollar, and “therefore it is able to lead the parallel market trends thanks to what it offers through various means, while continuing the flow of the currency on a regular basis.”
Al-Shahoumi confirmed, in a press statement, that the quantitative controls imposed by the Central Bank are due to the balance of payments deficit during the past year, and therefore the bank is resorting to adjusting its balance this year.
Analysts believe that the solutions provided by the Central Bank are insufficient and cannot confront the black market pumping of foreign currency, nor can they respond to demand, especially from small merchants who cannot apply for credits.
Disagreement with the central
Talk about the hidden conflict, as described by observers, between the Prime Minister in Tripoli, Abdul Hamid Al-Dabaiba, and the Central Governor, Al-Siddiq Al-Kabir, has increased the pace of the economic problems in the country, as this conflict has not stopped since it appeared publicly last November, with many promoting Al-Dabaiba’s determination to pressure Al-Kabir’s dismissal. After the latter took steps to rationalize the government’s expanded spending.
Al-Dabaiba adheres to his position and seeks to change the governor of the Central Bank of Libya by reaching a set of understandings with the ruling partners that require replacing Al-Kabir, similar to the oil deal, but this position is still met with opposition from most members in the House of Representatives and the State House, who refuse to take the step currently in light of what… He receives great international support.
Those interested in economic affairs in Libya fear that the country will pay the price for the conflict between Al-Dabaiba and Al-Kabir, which has begun to raise widespread controversy in specialized Libyan circles, as the dispute between the two parties affects the position of the local currency against foreign currencies in the parallel currency market.
Last December, Al-Siddiq Al-Kabir stopped funding public spending for the National Unity Government, and according to observers, since that time, Al-Dabaiba decided to turn against Al-Kabir and remove him from his position, provided that he appoints a person close to him, thus ensuring that the crisis of stopping spending on his government and the groups affiliated with him will not be repeated. And he even communicated with Al-Kabir’s groups so that they would not stand in the way of implementing his plan.
In this context, the “Africa Intelligence” website revealed mediation led by Turkish Foreign Minister Hakan Fidan, during his visit to Libya on February 7, to bring the Prime Minister of the Unity Government, Abdul Hamid Dabaiba, and the Governor of the Central Bank, Al-Siddiq Al-Kabir, closer together and calm the tension between them.
According to the French intelligence website, the Turkish minister secretly met with the Governor of the Central Bank, Al-Siddiq Al-Kabir, with coordination and facilitation from the Turkish Ambassador to Libya, Kanan Yilmaz, during his visit to the capital, Tripoli, which was not his first, but rather he arrived there in early 2023 in his capacity as director of the Turkish intelligence service.
Africa Intelligence added that the meeting, which took place in complete secrecy and away from the media and press, during which the two sides discussed viewpoints inside the Turkish embassy.
Fidan had met with the Prime Minister of the Unity Government, Abdul Hamid Dabaiba, before his major meeting. The website indicated that Ankara continues to support Dabaiba’s government, while countries including France and Egypt are exerting pressure to form a new government to hold general elections.
Many problems
The rise in the dollar exchange rate is not the only problem that surprised the Libyans as the holy month approached. However, the delay in disbursing salaries and the lack of liquidity also heightened popular anger in Libya and ignited the fires of accusations between the National Unity Government in Tripoli and the authorities of the eastern region, as popular pressure made Al-Dabaiba break his silence. Explaining that the reason for all this is the House of Representatives, which repeatedly refused to approve a budget for its government and also delayed.
In response to Al-Dabaiba’s statements, the House of Representatives reaffirmed its decisions, sending a letter to a number of parties in the Libyan state warning against public institutions and companies providing any funds to the government of national unity, whether in the form of a loan or under the heading of social responsibility.
Aguila Saleh attributed the prevention of giving money to the government to the presence of “oversight reports issued for the past fiscal years showing its waste of public money and its unlawful disposal,” according to the text of the letter.
Saleh’s speech stressed that violators will put themselves under legal responsibility on charges of negligence in preserving public money and wasting it in violation of the provisions of Law No. (2) of 1979 regarding economic crimes and its amendments.
Saleh’s speech included the Attorney General, the Governor of the Central Bank of Libya, the Chairman of the Audit Bureau, the Chairman of the Administrative Control Authority, the Chairman of the National Anti-Corruption Authority, the Chairman of the Board of Directors of the National Oil Corporation, the Chairman of the Board of Directors of the Libyan Investment Corporation, the Chairman of the Board of Directors of the Telecommunications Holding Company, and the Chairman of the Board of Directors. Economic and Social Development Fund, and Head of the Africa Investment Portfolio.
This came days after the statement of the Prime Minister of the National Unity Government, Abdul Hamid Al-Dabaiba, during a celebration held in the capital, Tripoli, to commemorate the anniversary of the February 17 Revolution, during which he confirmed that the House of Representatives had caused a delay in disbursing January salaries due to the failure to adopt the general budget for this year. .
Despite the prosperity and comfort that the Dabaiba government is trying to show publicly, it is going through difficult economic circumstances that coincided with the announcement by members of the Petroleum Facilities Guard at the Zawiya refinery of the closure of the refinery and the Mellitah and Misrata oil complexes, to demand obtaining their rights from previous salaries and settlements and implementing the decision to grant them health insurance similar to what the employee receives. At the National Oil Corporation.
The employees, in a video statement circulated on relevant pages on Facebook, gave the employees responsible for operating these facilities five days to respond to them, indicating that the closure will affect the fields, complexes, facilities, warehouses and departments in the oil sector throughout Libya, after agreement with their colleagues in the Oil Facilities Guard, and they will continue to do so. They staged a sit-in without specifying a time for resuming operation. They stressed that they do not belong to any political faction, and they refuse to transfer the agency’s members to other security services unless they are given their full legal rights.
Opinions and analysis
In contrast to these problems, expert and economic analyst Mohsen Al-Darija believes that Libya’s oil income during the past two years is considered the highest since 2013, and it is supposed to improve the living situation. There could have been a development boom due to high oil prices, with prices averaging more than $80 per barrel. It reached 120 in some periods.
He adds that the change that occurred in the exchange rate of the dollar equaled a larger amount of the Libyan dinar that the government used to expand spending, and this expansion caused an increase in the amount of the Libyan dinar, which increased the demand for the dollar instead of improving the exchange rate as a result of the increase in the amount of dollars available to the Libyan market. That is, the increased spending absorbed all the additional dollars and more.
While Libyan businessman Hosni Bey stated that the prices of currency or other materials, materials of all kinds, whether durable or consumer, and services of all kinds, their price is determined by the law of the universal economy. Supply plus demand equals price, and no human being, authority, or government can change this universal equation, even if it is possible to influence it. In the very short term, it is partial and temporary, but this law is fixed, so we can say that what we have is the product of supply/demand + demand/offer D.L. and is equal to the exchange price of the dinar.
Economist Ibrahim Wali wrote that the main problem lies in the presence of a large difference between the official dollar exchange rate and the dollar exchange rate in the parallel market, and as long as the difference between them is large, it encourages the presence of speculative traders, and these speculators are the ones who, on behalf of the Central Bank of Libya, support the parallel market, which is an enemy. The Central Bank, as economists say, so that the Central Bank cannot defend its national currency and it remains transported in piles as if it were in a vegetable market and under the wall of the Central Bank.
Wali continued, “How can it not be the case when a speculator takes a $10,000 card in the morning from the Central Bank of Libya and takes it in the evening to spend it in the parallel market to obtain a revenue of 7 to 8 percent, and when this speculator performs this process only ten times, the profit doubles.” Up to 300 percent. Indeed, there are those who obtain more than 50 cards, so what is their profit from this process?
Wali continued, “The Central Bank implemented these wrong policies, believing that the value of the Libyan dinar would rise against the dollar. Therefore, the large difference between the official exchange rate of the dollar and its price in the parallel market is what led to the presence of speculative currency traders, and it is what opened the doors wide for corruption, smuggling, theft, etc. .. These wrong policies are carried out by people through successive governments, and thus the result of these policies is failure and failure to manage spending and the presence of theft and smuggling. All of these negative results led to an imbalance in all policies (political, economic, monetary, and financial).”
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2024-04-25 21:24:34
