In a decisive economic move aimed at restoring balance to the country's financial landscape, the Central Bank of Libya officially announced an adjustment to the Libyan dinar's exchange rate, devaluing it by 14.7% against the Special Drawing Rights (SDR). Under this decision, the Libyan dinar is now equivalent to 0.1150 SDRs instead of the previous rate of 0.1348, reflecting an official exchange rate of approximately 6.36 dinars to the dollar.
Confronting the parallel market and price fluctuations
This decision comes at a sensitive time, as the Libyan economy faces increasing pressure. Recent days have seen a significant decline in the value of the dinar on the black market (parallel market), leading to unjustified price hikes in basic commodities. The US dollar surpassed the 9 dinar mark before retreating slightly to settle at 8.7 dinars, creating a wide gap between the official and parallel exchange rates. This necessitated urgent intervention from monetary authorities to bridge the gap and curb speculation.
Economic context and historical background
This decision cannot be separated from the broader context of the Libyan economy, which has been experiencing significant challenges for years. Since 2011, Libya has faced profound structural challenges due to its near-total dependence on oil revenues, which constitute the main artery of the national budget. The ongoing political and institutional divisions have led to instability in fiscal and monetary policies, making the dinar vulnerable to fluctuations in global oil markets. This latest decision implements the recommendations of the Monetary Policy Committee at its first meeting of 2026 and responds to international economic changes, most notably the decline in oil prices and the decrease in sovereign revenues, necessitating precautionary measures to protect foreign reserves.
Challenges of the absence of a unified budget
The Central Bank explained in its statement that the exchange rate adjustment comes amidst the continued absence of a unified national budget, the most significant challenge hindering financial stability. The statement indicated that the unsustainable growth in public spending, the persistence of duplication of expenditures outside of disciplined fiscal frameworks, and the disregard for the absorptive capacity of the national economy have necessitated the adoption of a package of reforms. These measures aim to ensure the sustainability of public resources and maintain monetary stability in the face of uncontrolled spending.
Comprehensive reform package
The Central Bank's actions were not limited to adjusting the exchange rate; the Monetary Policy Committee also approved a broad package of monetary and trade policy reforms. These reforms include stricter regulation of currency exchange activities, curbing the parallel market through effective monetary policy tools, and protecting the country's foreign currency reserves. Through these steps, the Central Bank aims to achieve relative price stability and mitigate the impact of imported inflation on Libyan citizens, in an effort to chart a more stable course for the national economy amidst the turbulent local and international landscape.
