Libya’s central bank plans to bolster local currency as dollar declines
Date
10/28/2024 8:17:26 AM
(MENAFN) The Central bank of Libya recently announced a plan to bolster the local currency, prompted by the dollar’s declining value against the Libyan dinar, while experts expressed concerns about how to address the large volume of funds circulating in the black market. Central Bank Governor Naji Mohammed Issa shared the bank’s short-term strategy with the International Monetary Fund’s experts during the IMF and World Bank annual meetings in Washington, outlining goals to strengthen the dinar, regulate the foreign exchange market, increase liquidity, and expand electronic payments.
Official data indicates that around 44 billion Libyan dinars—equivalent to more than 9 billion US dollars—circulate outside the formal banking system. This figure, up from 27 billion dinars in 2017, highlights the challenge of convincing Libyans to deposit money in banks. Many citizens prefer to keep their cash at home, as concerns over security and limited liquidity have eroded trust in state-run banks.
Libyan economic expert Saber Al-Wahsh noted that authorities must consider alternative approaches beyond traditional interest rates to restore confidence in the banking sector. He suggested introducing investment accounts aligned with Islamic banking principles, among other tools compatible with Libyan cultural preferences, to encourage citizens to entrust their money to banks. However, Al-Wahsh pointed out that changing the Libyan currency is impractical at this stage, especially given that such measures are often pursued by countries following revolutions; additionally, substantial state funds are reportedly circulating near borders with neighboring countries, such as Tunisia.
A report by the American NGO "The Sentry" has warned of the risks stemming from Libya’s reliance on black-market dynamics in both eastern and western regions. It emphasized that unless progress is made toward unifying the central bank, particularly through a shared digital clearing system, the black market will remain critical to Libya’s economy, hindering efforts to combat money laundering effectively.
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