Libya is facing a significant dollar crisis, with a growing gap between the official and parallel exchange rates. The country's economic experts are proposing new solutions to address this issue. One such expert, Moukhtar Al-Jadid, has suggested that the way dollars are distributed to citizens and traders needs to be changed. He argues that the current system, where traders receive dollars directly from the Central Bank, creates an incentive for them to sell dollars on the parallel market, driving up the exchange rate.
Al-Jadid proposes that dollars should be directed to citizens instead of traders, and that citizens should then sell them to traders. This, he believes, would create an economic interest for traders to buy dollars at a lower price on the parallel market, rather than selling them at a higher price. This approach aims to reduce the demand for dollars on the parallel market and stabilize the exchange rate. Al-Jadid also emphasizes the need for a more equitable distribution of foreign currency among Libyans.
The issue of dollar distribution is closely linked to the availability of liquidity in the country. The Central Bank of Libya had announced a plan in August to distribute 3,000 dinars in cash to each account holder, and 4,000 dinars to banks in the south. However, it is unclear how effective this plan has been in addressing the liquidity shortage. Al-Jadid has called on citizens to provide information on their bank accounts and the amounts they were able to withdraw during August.
The parallel market for dollars has become a significant challenge for the Libyan economy, with the exchange rate fluctuating widely. The Central Bank has been trying to manage the exchange rate, but it remains under pressure. Al-Jadid warns that the introduction of a floating exchange rate, or "free float," could have significant consequences for the economy and the standard of living of Libyans.
Al-Jadid also points out that the growth of the dinar money supply is contributing to the pressure on the dollar. He explains that the money supply consists of bank deposits and cash in circulation, and that the expansion of electronic payment systems has made it easier for bank deposits to be transferred into cash. This has increased the demand for dollars and put further pressure on the exchange rate.
To address these challenges, Al-Jadid suggests that the authorities need to think about how to limit the movement of cash in circulation, now that bank deposits are more freely transferable. This will require a coordinated approach that takes into account the distribution of dollars, the availability of liquidity, and the size of the money supply.
The debate on the dollar crisis in Libya highlights the complex challenges facing the country's economy. The issue is not just a technical one, but also has significant social and economic implications for Libyans. Any changes to the management of the exchange rate or liquidity will have far-reaching consequences, and will require careful consideration of the potential impacts on the economy and society.
Key points
- Experts propose changing the way dollars are distributed to address the dollar crisis.
- The growth of the dinar money supply is contributing to pressure on the dollar.
- Limiting the movement of cash in circulation is crucial to addressing the dollar crisis.
