In sharp contrast to the disappointing setbacks in the Libyan Political Dialogue Forum (LPDF) important steps have been taken to ‘develop critical economic reforms and restore public confidence in the management of Libya’s economy.’ The UN’s Stephanie Williams convened a 14 December technical meeting in Geneva of representatives from Libya’s main financial institutions to discuss policy reforms and ‘establish a more durable and equitable economic arrangement.’
The meeting was held at a time of heightened acrimony over control of Libya’s oil revenues between the Central Bank of Libya (CBL), National Oil Corporation (NOC0, and leading figures in the internationally-recognised Government of National Accord (GNA). These revenues are currently held in the Libyan Foreign Bank (LFB) pending a political settlement. The GNA and CBL have been at odds over who has the right to appoint a new LFB chairman. These tensions — which exist alongside the ongoing problem of parallel eastern Libyan institutions — have contributed to a collapsing Libyan Dinar which is exacerbating the hardships for ordinary Libyans in what is largely a cash-based society.
On 16 December the CBL’s bank’s board of directors met for the first time in five years and agreed to devalue the Libyan Dinar and reunify the exchange rate. This is a positive step which is expected to help stabilise the dinar and aid in the fight against corruption. UNSMIL said that the decision was ‘a source of significant hope for the Libyan people’ and a sign that the bank was moving towards reunification. It also said that an international audit of both branches of the CBL — part of the process of re-unifying the bank and fully re-establishing national accountability mechanisms — was now nearly halfway complete.
The CBL announced a devaluation from the official rate of LD1.4 to the dollar to LD4.48 to the US$ which will come into effect on 3 January. Economists have been calling for such a reform since 2014 when the official and black-market rates began to diverge widely and fluctuate rapidly. The CBL’s Governor Sadiq el-Kabir, probably agreed to the measure in order to obtain support from the international community as he continues to come under increased pressure from domestic rivals to step down.
But the announcement of the devaluation — nearly three weeks before it actually takes effect — is likely to lead to frenetic trading while also opening windows for corruption. Black market currency traders will undoubtedly be among the losers of this reform and may seek to undermine it. Yet, if the currency reform is implemented smoothly, it should have a positive impact on combatting the corrupt practices including fraudulent Letters of Credit and fuel smuggling. It also promises to stabilise the Libyan Dinar to the benefit of ordinary Libyans who have endured wild fluctuations in the price of key consumer goods.