Will Libya Devalue Its Dinar?
In an article published by al Monitor, Jason Pack and Hedi Sal discuss the current economic crisis in Libya, and the political and financial posturing surrounding the devaluation the Libyan dinar.
Last month, the value of the Libyan dinar fell as low as 9 to the US dollar on the black market, down from 6 dinars, while the ongoing liquidity crisis (over 90% of Libya’s liquidity is estimated to be outside the banking system) means that citizens are unable to withdraw money from their banks and are often not receiving their salaries because their employers simply do not have access to hard cash…
The laws governing the banking sector in Libya authorize the CBL to revise the exchange rate of the dinar against other currencies in response to changes in supply and demand, as well as other economic policy priorities. Although Kabir may be considering devaluing the dinar, he has been reluctant to announce this publicly and appears to have been resisting pressure from the internationally recognized Government of National Accord to do so. In his last press conference on April 23, Kabir said that painful economic decisions are necessary but fell short of outlining any major policy solutions for Libya’s ongoing economic crisis. The AB is also advocating temporary devaluation among other nonfiscal measures to rescue the economy. However, critics of this approach fear that devaluation would achieve nothing, functioning instead as a hidden tax that will create extra social and security costs for Libyan citizens.
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