After the Government of National Accord (GNA) adopted an economic reform package — in line with the ceasefire agreement that was negotiated in Zawiya in early September — the UN Support Mission in Libya (UNSMIL) expressed its hope that the reforms would improve the national living standards. Its statement was issued amid a new wave of protests in Tripoli against the GNA and its institutions because of its inability to improve living standards and provide security for the capital’s residents.

The economic reform package includes an initiative to change the Libyan Dinar’s exchange rate by imposing fees on foreign currency purchases and modifying the consumer subsidies system. To offset the latter’s negative effects on consumers the GNA announced that it would increase family allowances by US$500 in 2018 when it realeases the next tranche this autumn. It is also putting new restrictions on Letters of Credit which have been used by powerful militia leaders to exploit the liquidity crisis and financing their de-stabilising activities. Letters of Credit will not be available for any imports except those that a new technical committee defines as ‘essential and strategic’. The latter initiative — which was implemented on 23 September — is intended to directly curb the militias’ most profitable source of funding.

Most attention has been focused on past economic reform efforts to de-value the currency. There had been reports that the central bank had already imposed new fees earlier in September, but the GNA recently confirmed that a new fee of 183% on any hard currency transactions was going into effect. Libyans watched the official exchange rate carefully throughout the week as the government tried to close the gap between the previous LD1.4 to the US$ official exchange rate and the black market exchange rate, which currently hovers at around LD6.0 to the US$.

There were soon complaints that there were now three exchange rates to cope with:

• the official exchange rate of LD1.4 to the US$ for government transactions;
• the official exchange rate for commercial transactions — to which the new 183% fee applies — at LD3.9 to the US$; and
• the black market exchange rate of around LD6.0 to the US$.

Some even suggested there was a fourth exchange rate to contend with: the rate that they pay when exchanging digital funds such as through Amazon gift cards.

This is a segment from macroeconomic analysis within the weekly Libya Politics & Security report. To receive the rest of this analysis and a free report, please contact one of our consultants here.