The economic debate in Libya has recently focused on the complexities of import financing through documentary credits, foreign currency allocation, and the fair distribution of dollars. A member of the Central Bank of Libya's monetary policy committee, Ayoub Al-Farasi, emphasized that the import process involves multiple parties, including the Ministry of Economy and Trade, commercial banks, the Central Bank, and customs authorities. Each entity has distinct responsibilities, and concentrating these responsibilities in one entity could lead to inefficiencies.
Al-Farasi's comments sparked a broader discussion on the roles of various institutions in Libya's import financing process. He argued that the process begins with the Ministry of Economy and Trade, which registers companies and licenses their activities. Commercial banks then deal directly with importers, opening credits and handling documentation. The Central Bank of Libya provides foreign currency to commercial banks, which is then used to finance imports. This multi-party process aims to ensure that imports are properly regulated and financed.
The debate also touches on the significant difference between the official dollar exchange rate and the market rate. Businessman Hosni Bey argued that the focus on who benefits from the official dollar rate misses the root of the problem – the substantial gap between official and market rates. This gap creates a rent for those who obtain dollars at the official rate, regardless of their status as traders, companies, or citizens. Bey provided a hypothetical example, calculating that a 3-dinar difference between the official and market rates could result in a 75 billion dinar rent.
Idris Al-Sharif, a former deputy minister of finance and economic expert, questioned whether all dollar applicants who meet the requirements receive the currency with the same speed, efficiency, and fairness. He emphasized that the issue extends beyond identifying the entity responsible for opening credits or providing dollars to how the limited foreign currency is allocated among applicants. Al-Sharif asked whether the allocation is based on the priority of applications, the type of goods, or the distribution of quotas among banks.
Ayoub Al-Farasi responded that determining priorities and monitoring customer applications is the responsibility of commercial banks. They receive applications, arrange them, and forward them to the Central Bank of Libya according to established procedures. This distinction is crucial in discussions about transparency and equality in accessing foreign currency. The Central Bank of Libya has announced efforts to regulate credits and provide essential goods, emphasizing coordination between relevant parties.
The issue of dinar circulation was also addressed, with Al-Farasi questioning whether focusing solely on public spending and dollar supply is sufficient to understand Libya's monetary crisis. He suggested that increasing the speed of dinar circulation in a productive economy can be linked to real economic transactions without necessarily increasing the money supply. However, Libya's economy, heavily reliant on oil revenues and imports, poses risks if not matched with domestic production growth.
The discussion included a review of economic data, with Hosni Bey citing figures from March 2026 showing that the money supply was approximately 216.9 billion dinars, with 70.4 billion dinars in cash outside banks. These numbers indicate that most of the money supply is within the banking system, raising questions about why this liquidity is not being converted into credit, investment, and production.
Key points
- The debate highlights the complexities of Libya's economic challenges, including dollar allocation, import financing, and dinar circulation.
- The significant gap between the official and market dollar exchange rates creates rents for those who access dollars at the official rate.
- Discussions focus on increasing transparency, regulating the allocation of foreign currency, and promoting domestic production to stabilize Libya's economy.
