Libya is fighting a ferocious war against an increasing budget deficit which consumes its financial resources, depletes its reserves of foreign currencies, whose prices are continually rising. Worsening the situation is the fact that oil fields have halted their production – a catastrophe as Libya’s only current source of income.
Libya is fighting a ferocious war against an increasing budget deficit which consumes its financial resources, depletes its reserves of foreign currencies, whose prices are continually rising. Worsening the situation is the fact that oil fields have halted their production – a catastrophe as Libya’s only current source of income.
Ahmed Basha, a 44-year-old wedding supplies trader in Al-Musheer Market in Tripoli, is no longer knows how or when to supply the needs of his shops due to the unstable prices of foreign currencies and the recession of his business due the increasing prices of his goods.
Adel Mohamed, a 37-year-old food trader, says that wholesale traders indiscriminately raised their prices by 15 dinars for each package of goods and that consumers were outraged, to the extent that some of them boycotted his goods.
Central Bank is to blame
Economic analysts say that the Central Bank of Libya based in Tripoli is to blame for the collapse of the Libyan dinar since it did not take the measures needed to maintain the foreign currency reserves, stressing that it intervened in other irrelevant specializations like implementing the public budget and economic policies and abandoning its key role to monitor the economy.
Isam Zanuba, an economic observer and analyst, warned against the continued collapse of the Libyan dinar, stressing that the most affected would be citizens with low incomes who rely on the state. He added that the currency’s value reflects the country’s prestige, rejecting the demands that the dinar should be floated.
He also warned against the spread of unemployment and depression which will affect the owners of small projects who will be forced to minimize their economic activities and sack many workers due to the currency’s collapse.
“The economic and social danger is undeniably imminent unless the foundations of the civil state are established in terms of administration, regulation, control and sanctions, the investment mechanisms in Libya are reconsidered and the income sources are diversified,” he said.
Importing foreign currency is prohibited
Isam Awl, the Central Bank of Libya’s spokesperson, says that the bank is subject to an international measure that prohibits Libya from importing foreign currencies, due to its security situation and can therefore not pump dollars into the governmental banks working in Libya.
In his view, the solution should come from citizens who have to demand “immediately” that the oil fields and ports controlled by the Petroleum Facilities Guarding Authority at the center of Libya are reopened and distanced from any political conflicts and they should “stop playing with the Libyans’ livelihoods” as resuming oil production will, says Awl, make the dollar flow again and lower its prices in the parallel market.
He also revealed the measures taken by the Central Bank to ease the “artificial” pressure caused by the market players. It took new measures to meet the “personal demand on foreign currencies” for the purposes of studying and medical treatment and regular issuance of letters of credit for importing goods based on the actual consumption of individuals and society and production requirements, and insuring the payment of the expenses of the students and employees abroad.”
However, 23-year-old Fatima from Tripoli said she received no help from the Libyan banks despite the fact the she has been receiving medical treatment in Tunisia for more than a year and a half. She stopped the treatment, as she is longer able to afford it due to the fall of the Libyan dinar compared to the Tunisian dinar (each Tunisian dinar equals 1.76 Libyan dinar) and for the first time in its history, the Libyan dinar’s exchange rate fell to $ 1:4 in the parallel market compared to $1:1.38, its official rate at the Libyan banks.
Rescue government froze subsidies
The average Libyan citizen is dependent on imported goods, which makes them directly connected to the exchange rates of the dollar or the euro. The price of a bottle of vegetable oil, for example, has reached six Libyan dinars ($ 4.35), which is unprecedented since a decision to replace subsidized goods with cash subsidies, which has yet to be implemented.
The Municipal Guards’ members justified not taking any measures to curb the huge increase in prices by saying that they are only authorized to control goods in terms of quality and expiry dates, stressing that traders are subject to Law No. 23 which liberates the prices of goods, allows competition and does not set profit margins.
Jamal Shaybani, Director of the Prices Balance Fund, says the Rescue Government in Tripoli issued a decision to suspend importing subsidized goods for the cooperatives run by the government and replace them by providing financial aid. Therefore, in 2014 and 2015, there were no contracts to import food goods except for flour. However, the decision has not yet been implemented, which caused a real problem to the ordinary Libyan citizen, who was no longer able to buy subsidized goods that are imported at the dollar’s official rate.
Dependence and apprehension
Ahmed Khamisi, an economic analyst, says that Libya meets 90% of its markets’ needs through imports and that the measures taken to stop dealing in the black market will drive prices even higher, particularly since commercial banks are not able to provide the needed foreign currency.
In addition, credits are only granted on a small scale to import flour and some basic goods. As a result, prices have gone through the roof as most importers supply their foreign currency needs with the black market, which increased the prices of goods by 60%.
The Central Bank’s statements prove that the economic observers’ aforementioned analyses are accurate. The Central Bank’s Foreign Currency Control Authority met the directors of the commercial banks and decided to allow them to issue letters of credits to traders so that they can get their needs of foreign currencies provided that these letters of credit are supervised by the Central Bank through an electronic system which links it with these banks.
The meeting showed that the Central Bank will meet traders and encourage them to shoulder the responsibility of providing food and medicine for people which is a national duty that exceeds “profit and monopoly.”
Khaled Tarhouni, a trader and owner of an electronic appliances shop, is concerned that the credit will only be issued to certain categories. The beneficiaries, he says, will pump the foreign currencies they get into the black market and then they would be sold to traders to meet the market needs of goods, which might be less important. Thus, the collapse of the Libyan dinar will continue.
According to observers of the economic situation in Libya, the traders and suppliers monopolize importing food goods and then pump them into the markets which help them control prices without any competition except for very few products.
Sa’eed Ashour was born in Tripoli in 1980. He worked at Al-Shababiya Channel and then acted as the spokesperson of the Illegal Immigration Authority for four years.
