By Abdulkader Assad
The Central Bank’s Currency Devaluation Will Deepen Libya’s Crisis
The Central Bank of Libya’s recent decision to devalue the dinar by 13.3% and tighten access to foreign currency is being presented as a step toward financial stability. In reality, it is a short-sighted move that risks deepening the country’s economic divide and fueling further political fragmentation.
This devaluation, which brings the official exchange rate to 5.56 LYD per dollar, comes at a time of unprecedented fiscal disarray. Libya operates under two competing governments, both spending without coordination, and a debt load nearing 270 billion dinars. Rather than acting as a unifier, the Central Bank’s policy reinforces division by imposing monetary tightening without a political or economic consensus.
Ordinary Libyans are already bearing the brunt. With personal allowances for foreign currency cut in half and inflation eating away at salaries, the pressure on households is mounting. The parallel market has responded swiftly, pushing the dollar above 7.50 dinars, eroding confidence in the national currency and widening the gap between official policy and market reality.
Meanwhile, global oil prices—a lifeline for Libya’s budget—have taken a hit. With Brent crude dipping below $80, Libya’s oil-dependent economy is poised for further revenue losses. The Central Bank’s decision to devalue now, in the absence of fiscal reform or unified budgeting, exposes Libya to even greater vulnerability. Reduced oil revenues mean fewer dollars to stabilize the exchange rate and a deeper squeeze on imports and subsidies.
The Central Bank justifies its actions by citing the need to protect reserves and curb uncoordinated spending. But without a political agreement to unify spending or a national budget that promotes transparency and accountability, these monetary measures will only exacerbate mistrust and instability.
What Libya needs is not a currency adjustment, but a political one. Any reform, especially in such a fragile context, must be grounded in consensus. Devaluation without coordination risks becoming another battleground in Libya’s fractured governance.
Until there is one government, one budget, and a shared economic vision, technical fixes like these will only dig Libya deeper into crisis.
