Amid ongoing political instability and security concerns, Libya’s currency has lost 7% of its value on the black market since April, adding to the country’s economic woes before elections on June 25.
Dealers say a dollar now buys 1.40 Dinars, compared with 1.35 two weeks ago and 1.30 in early April.
Libya’s Central Bank maintains that the official rate of the Dinar is about 1.25 to the dollar, but the black market –– which now supplies most necessities –– is considered a more accurate indicator of the current state of the Libyan economy.
Three years since the revolution that overthrew Muammar Gaddafi in 2011, Libya continues to face political and economic turmoil.
Last month, forces of a breakaway general, Khalifa Haftar, attacked Libya’s Parliament and suspended its activities. Rebel groups have blockaded oil terminals in Eastern Libya for ten months in a push for regional autonomy and a greater share of the country’s oil revenue. In October, Libyan oil production was down 90% as Prime Minister Ali Zeidan was briefly seized by a government militia responsible for protecting Parliament.
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While rebel groups promised to give up two of four blockaded oil terminals in early April, internal conflicts within Libya’s main political body, the General National Congress, has halted progress on that front. Since last July, the Libyan government been spending its reserves of foreign currency, estimated at $132 billion, to fund a $50 billion budget –— most of which goes toward the large volume of Libyans on the state payroll as civil servants.
Writing for Reuters, Ulf Laessing notes, “Any spending cuts would be hugely unpopular with Libyans, used to bread costing two U.S. cents and filling up their cars for less than $5, as well as free health care and education.”
Other symptoms of Libya’s instability have contributed towards the Dinar’s fall. Bank robberies have left the Central Bank unwilling to give to commercial lenders, and insurance companies are reluctant to cover the movement of cash shipments from the central bank’s overseas accounts to Libya.
Husni Bey, the Chairman of import-export business the HB Group, has recommended a devaluation of the dinar. Speaking to Reuters, he said, “The Libyan dinar should be devalued in stages to a more realistic level.” Although oil production is currently at a low of just 150,000 barrels per day, Bey believes devaluation is necessary “even if full oil exports are resumed at 1.6 million bpd.”
However, spokesman Musbah Alkari has declared that the Central Bank does not “plan to lower or increase the value of the dinar.”