Tripoli— On 6 April, the Central Bank of Libya (CBL) announced a 13.3% devaluation of the dinar against special drawing rights (SDRs), increasing the value of the dollar by 5.5677 dinars. Under this decision, the value of the Libyan dinar was adjusted from 0.1555 SDRs to 0.1349 SDRs per Libyan dinar, according to the bank, which explained that the decision would be effective starting the same day.
The CBL described the expected move as “necessary in light of the absence of any hope or prospect for unifying dual spending between the two governments”.
Libyan economists and politicians have widely criticized the decision to devalue the Libyan dinar against foreign currencies, considering it the result of “misguided government policies that have led to an expansion in public spending, continued parallel spending, and declining oil revenues.” They even described it as an “economic suicide”. Yet the problem derives from the lack of a unified government and from the blatant foreign intervention that prolongs divisions in Libya.
Here is the FULL TEXT of the CBL’s statement on 6 April 2025:
“Governor of the Central Bank of Libya’s Statement
As the Central Bank of Libya (CBL) reaffirms its full commitment to the tasks entrusted to it in accordance with the provisions of Law No. 1 of 2005 on Banks and its amendments. And within the framework of its responsibilities towards the nation and citizens, and based on the principle of disclosure and transparency, we deemed it necessary to clarify all facts and challenges facing the CBL’s management and the current reality of the Libyan economy, in order to provide a comprehensive understanding of the economic and financial situation of the state, as well as the challenges and obstacles that hindered the achievement of the desired goals, the most important of these challenges are as follows:
1. The volume of dual public spending during 2024 reached 224 billion LYD, including 123 billion LYD in expenditures by the Government of National Unity, 42 billion LYD for oil swaps, and approximately 59 billion LYD in spending by the Libyan Government, compared to oil and tax revenues amounting to 136 billion LYD. This level of spending generated a demand for foreign currency of $36 billion, contributing to the distortion and widening of the gap between the supply and demand for foreign currencies, thus preventing the CBL from achieving its objectives of maintaining exchange rate stability and strengthening the value of the Libyan dinar.
2. The expansion of dual public spending over the past years and during 2024 led to a significant increase in the money supply, reaching 178.1 billion LYD. This is expected to result in several negative economic effects and pose challenges to the CBL considering the limited tools available to contain it. It will further increase demand for foreign currency, continue to pressure the Libyan dinar exchange rate against foreign currencies in the parallel market, elevate inflation rates, and risk undermining confidence in the local currency.
3. The low levels of oil export revenues deposited with the CBL, which amounted to only $18.6 billion during 2024, while foreign currency expenditures reached $27 billion, resulted in a significant gap between the demand and available foreign currency. This made it difficult for the CBL’s management to define a clear policy for exchange rate management due to the increasing demand for foreign currency and the continued expansion of dual public spending.
4. Considering the continued issuance of spending decisions based on a 1/12 budget during 2025 by both governments, and the ongoing expansion of public spending at the same pace as in 2024, reaching levels of 224 billion LYD, the financial and economic situation of the state will further deteriorate, creating serious challenges for the CBL and an increase in demand for foreign currency, an exacerbation of the balance of payments and public budget deficits and an rise in the public debt balance.
5. Data for the first quarter of 2025 clearly shows the continued pace of dual public spending, deficit financing, the rising demand for foreign currency, and the inability of oil revenues to cover this demand, which is a serious matter. Total foreign currency expenditures for the first quarter amounted to approximately $9.8 billion (of which $4.4 billion for letters of credit and money transfers, $4.4 billion for merchant cards and personal purposes, and $1 billion for government expenditures), equivalent to about $55 billion LYD. Meanwhile, oil revenues and royalties deposited at the CBL amounted to approximately $5.2 billion as of March 27, resulting in a deficit of about $4.6 billion in just three months. The situation would become even more critical in the event of a decline in oil production and export rates due to any changes, or a deterioration in global oil prices.
6. The expansion of public spending resulting from various decisions and laws has led to a rise in the level of public debt at the CBL in both Tripoli and Benghazi, reaching approximately 270 billion LYD currently, of which 84 billion LYD at the CBL in Tripoli and about 186 billion LYD at the CBL in Benghazi. It is expected that total public debt will exceed 330 billion LYD by the end of 2025, considering the absence of a unified budget and continued spending at the same pace as 2024. This is a very serious and unsustainable indicator, causing major distortions in macroeconomic indicators.
7. To reduce the gap between supply and demand for foreign currency and the balance of payments deficit, the CBL was compelled to use part of its foreign currency reserves for a limited period to maintain exchange rate stability at acceptable levels, preserve the prices of goods and services, and curb the runaway inflation rate and the deterioration of citizens’ purchasing power. However, the use of reserves is unsustainable, which has forced the CBL to reconsider foreign currency regulations and the exchange rate to contain the consequences of unrestrained public spending and the absence of effective, goal-oriented macroeconomic policies.
8. The CBL affirms that it has fully carried out its duties in maintaining foreign assets at levels exceeding $94 billion, of which $84 billion are reserves managed by the CBL, despite the significant challenges and the risky environment in which it operates.
9. The governmental division within state institutions and ministries has led to the adoption of inconsistent and conflicting measures and decisions between the two governments, alongside the absence of a comprehensive and unified economic vision applied across Libyan territory. This has weakened the CBL’s role in implementing an effective monetary policy.
10. The inability to combat and limit the phenomenon of goods and fuel smuggling has contributed to the worsening of the crisis, due to the increased demand for importing goods and fuel and the depletion of the foreign currency available to the CBL. Additionally, the rise in the number of informal migrant workers and illegal immigration, which drains approximately $7 billion annually, has further increased the consumption ofgoods and the demand for foreign currency in the parallel market. This parallel market now fuels all illicit activities and propagates Money Laundering operations and Financing of Terrorism through it.
Based on the abovementioned, the CBL, while carrying out its legally mandated duties aimed at achieving financial sustainability, stabilizing the general level of prices, ensuring the soundness of the banking system, and managing foreign currency reserves to safeguard them, and from a position of national responsibility, has been compelled to take a set of firm measures, including reconsidering the exchange rate to create balances within the economic sectors amid the absence of any hopes or prospects for unifying the dual spending between the two governments.
In conclusion, the CBL expresses its full readiness to cooperate transparently with all parties. It calls upon the legislative and executive authorities, as well as all relevant entities and institutions, to intensify efforts to end the political and institutional division, and to develop a short-term, goal-specific economic vision that addresses the current situation of the Libyan economy. Such a vision should harmonize macroeconomic policies, include the adoption of a unified budget that controls public spending at levels that would help avoid further negative impacts on the Libyan economy and the exchange rate of dinar, and consider the absorptive capacity of the Libyan economy.
The CBL also urges the judiciary and the Ministry of Interior to take strict measures to curb the phenomenon of goods and fuel smuggling to neighboring countries, and to combat the phenomenon of currency speculation in the black market, which has become organized and apparent.
Issued in Tripoli, Sunday, April 6, 2025