To what extent does the resumption of the sale of foreign exchange for personal purposes affect the dollar exchange rate on the black market?

Many merchants and citizens hope that the resumption of the sale of foreign exchange for personal purposes with a ceiling of $10,000 will lead to positive results on the dollar exchange rate as it continues to rise on the black market after a number of Libyan banks, most notably the Republic, Trade, Development and Unity Bank, called on their customers to update their personal data; In preparation for sale after the launch of the system allocated to the currency in an attempt by the Central Bank to rein in its price, but what is the extent of the impact of resuming the shipment of these cards on the black market? At a time when many citizens tended to buy the dollar; To ensure that the value of their savings is preserved, which increases the pressure on the demand for foreign currency, and thus its price will increase increasingly in the parallel market.

Provided it is open to everyone

Analyst and economic expert Abdul Hamid Al-Fadil considered, in a statement to Al-Raed, that the Central Bank’s opening of the foreign exchange selling system will positively affect currency prices against the Libyan dinar, provided that it opens it to everyone without exception with complete ease.

He added that opening documentary credits to import goods without restrictions and continuously, and without offering specific quantities, will reflect positively on the price of currencies against the Libyan dinar, and will provide an important part of liquidity in banks.

He continued: If the Central Bank opens the system of selling foreign exchange with restrictions during limited hours or offering limited quantities, the exchange rate in the parallel market will not decrease, but may rise. Likewise, if documentary credits are opened with restrictions, the dollar will not decrease.

15‎%‎

Analyst and economic expert Khaled Al-Delfaq said, in a statement to Al-Raed, that reopening the system of selling foreign exchange for personal purposes will affect, to some extent, very slightly, the exchange rate of the dollar on the black market.

He stated that its impact on the price may reach only 15%. Because the allocation for personal purposes amounts to $6 billion annually.

He pointed out that opening credits will have a significant impact on the parallel market. Because it amounts to $19 billion annually

Continuous rise
The price of the dollar in the parallel market exceeded the barrier of 6 Libyan dinars per dollar, after its price stabilized for years at 5 dinars per dollar, and in the parallel market it currently ranges between 6.50-6.30.
This decline in the Libyan dinar coincides with the bank’s announcement of a deficit exceeding 11 billion dollars.

Facilitating the sale
Identical press sources revealed that among the procedures to facilitate foreign exchange sales for the year 2024 is allowing the Central Bank to sell foreign exchange for personal purposes at a specified value and deposit it in the bank’s customer’s current account in foreign currency, and the customer has the right to sell it and transfer it to another customer.
Anyone who buys foreign currency and accumulates it in an account, whether small merchants or any merchants or beneficiary, has the right to transfer it abroad or open a documentary credit to import goods and services. This method will facilitate the trading of foreign currencies between bank customers and benefit from them instead of trading them in the parallel market.

Expansion of government spending
Economists believe that the most prominent reasons for this rise is the expansion of government spending, which has reached record numbers, as the state’s total public spending in 2023 reached 122.7 billion dinars, including 60 billion dinars for salaries, with the increase and accumulation of public debt, and the Central Bank’s attempt to reduce the deficit and preserve savings. In light of a large foreign exchange deficit amounting to about 10 billion dinars, according to what was stated in the Central Bank’s report, not to mention the dispute occurring between the National Oil Corporation and the Central Bank; Due to the cessation of the supply of oil sales to the Central Bank.

For his part, presidential candidate Ismail Shteiwi, in a blog post on his official page, blamed the Central Bank of Libya and the Dabaiba government mainly for the rise in the price of the dollar, noting that the bank is trying to reduce the deficit and preserve savings, but the Dabaiba government’s “irresponsible” spending of funds has obstructed all attempts to reduce the deficit. .

The struggle between the bear and the elder
The past months witnessed a dispute between Prime Minister Abdul Hamid Al-Dabaiyeh and the Governor of the Central Bank of Libya, Al-Siddiq Al-Kabir, before Al-Kabir returned to Tripoli from Turkey, where he stayed after his dispute with Al-Dabaiyeh.

According to a report by the French website “Africa Intelligence”, Al-Kabir, after Dabaiba threatened him, stopped financing his government’s public spending, and refused to pay contracts to Dabaiba’s relative and his advisor, noting that the conflict between them extended to the head of the Oil Corporation, Farhat Ben Gudara; To control the oil revenues that are deposited in the Central Bank, which is the only one responsible for distributing them.
The website added that after Al-Kabir stopped making payments to the Oil Corporation, the latter devised a trick to obtain financing to continue importing fuel, by establishing a barter system, in which crude oil was exchanged for imported fuel, and the Brega Company purchased and distributed the fuel.

Some fear that the confrontation between Dabaiba and Al-Kabir will threaten the financial and economic balances in the country, especially since it carries within it a struggle over the reins of the National Oil Corporation.

Tripartite meeting
To discuss the rise in foreign exchange and the increasing demand for it in the year 2023, last Thursday, the Governor of the Bank of Libya, Al-Siddiq Al-Kabir, discussed with the President of the Presidential Council, Mohamed Al-Manfi, and the Head of the Unity Government, Abdul Hamid Al-Dabaiba, public revenues and spending for the year 2023, and the measures that could be taken to rationalize consumer spending, audit the supplied fuel bill, and the conditions… Foreign exchange in 2023, and the reasons for the increase in demand in the same year by $5 billion, in addition to the measures required to be taken to control border crossings; To reduce the smuggling of goods, taking into account the existing credits and their goods worth $4 billion, or about 20 billion dinars, according to the Central Bank statement.