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Libya ... the economy is your "secret place" after the unification of the exchange rate


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Libya ... the economy is your "secret place" after the unification of the exchange rate

l March 18, 2021 - 06:24 Abu Dhabi time

Al-Moataz Ghoneim - Sky News Arabia

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The Libyan dinar has witnessed a significant decline recently
The Libyan dinar has witnessed a significant decline recently

In December of 2020, the Libyan Central Bank in Tripoli decided to amend the exchange rate of the dinar against the US dollar, and unify the price for all uses, in a decision aimed at curbing the liquidity crisis in the country and facing the serious economic impasse.

However, on the ground, the results of this decision were not reflected in the standard of living of the population, rather the matter increased in complexity with the cost of some basic commodities such as wheat, bread and others, so that the exchange rate adjustment became an accusation before the Libyan citizen who believes that the decision was taken in response to external pressures, without Taking into account the country's economic situation, especially with the crisis of the spread of the Corona epidemic and the fluctuation of oil sales revenues.

Professor of Finance and Investment at Nottingham Trent University in Britain, the founder of the Libyan money market, Sulaiman al-Shuhumi, believes that the adjustment of the exchange rate, which transferred it from the level of 1.4 dinars to 4.50 dinars against the dollar, took place in unusual circumstances amid the division of the central bank and the presence of competing authorities.

Al-Shohoumi added to "Sky News Arabia": "It seems that there were pressures to address the exchange rate differences, given the existence of great corruption due to the benefit that was taking place from the official and parallel rate difference by some parties, as the official price of the dollar was 1.4 dinars while the price was in the market. Parallel exceeds 6 dinars. "

The economic expert added that "treatment is required and the unification of the exchange rate is required, but due to the harsh conditions that the banking situation in Libya and its central bank is going through as a result of the division, the exchange rate created difficulties that obscured the positive repercussions of this adjustment."

 

Clearing Crisis

Al-Shuhoumi added, "It is true that the exchange rate adjustment has achieved justice among holders of foreign currency, so that there is a single price for all institutions, whether governmental, private or otherwise, but the other issue remains the continuation of the clearing crisis between banks in the East and the Central Bank in Tripoli."

On the other hand, Al-Shouhoumi said, "The prices of food commodities in the Libyan markets witnessed an increase rather than a decrease, because they were supplied at the previous official exchange rate, but many commodities were scarce, especially the expected import."

Al-Shohoumi called for the re-payment of the so-called "family allowance", which has been stalled since 2013 in Libya, with the approval of the new government budget, as this would achieve "a kind of balance and improvement in the incomes of citizens." He also urged the authorities to raise the salaries of Libyans to enhance purchasing power.

He stressed that "the improvement of the general economic and monetary situation in Libya will have very good effects on the level of citizen's income, on top of which is the unification of the central bank, its board of directors, its operations and clearing between banks, so that banking operations and internal transfers flow between the parties of the country, which invigorates trade and the movement of money and goods."

 

 

 

Cautious optimism

Al-Shuhumi expressed his optimism about the economic future in Libya, saying: "There is no doubt that we will witness improvement in the coming period, especially with the presence of the national unity government, which will have many burdens." He expected an improvement in the level of per capita income through the family allowance, and an attempt to address some of the bottlenecks and problems facing him. Such as higher prices for commodities and medicines.

He pointed out that the improvement in oil revenues and the increase in production and prices may push the authorities to reconsider the exchange rate of the dinar, and to bring it to a much better level than 4.5 to the dollar as it is now.

The black market is 'thriving'

On the other hand, the head of the Libyan-Egyptian Joint Economic Chamber, Ibrahim Al-Jarari, said that adjusting the exchange rate of the dinar helped alleviate the liquidity crisis across the country, but the continued scarcity of the dollar meant the black market would continue to flourish.

Al-Jarari explained to "Sky News Arabia", "Libya has been divided since 2014 between two authorities, while competing factions control the main economic institutions, and in light of the separation of the banking system in the east of the country from the Central Bank of Libya in Tripoli , two different rates of exchange appeared on the black market on both sides," Both are very different from the official rate, making the dollar out of reach for most Libyans. "

He added that "previous changes to the exchange rate and the devaluation of the local currency were not an integrated treatment of the economy. The increase in prices resulted from several factors, the most important of which was the change in the exchange rate, which prompted the Ministry of Finance in Tripoli to set the customs dollar's price at 2.12 dinars."

 

 

 

Al-Jarari explained that the Libyan economy was affected in general, and the citizen in particular, from the adjustments to the exchange rate, as imports decreased and with it customs revenues, while the citizen did not find liquidity in banks and suffered high prices.

He explained that "the citizen did not feel an improvement in his living situation after the unification of the exchange rate, as his suffering increased and the prices of basic commodities increased."

Al-Jarari pointed out that "there is hope in the new government headed by businessman Abdul Hamid Al-Dabaiba and Economy Minister Muhammad Al-Hawaij to change the economic path for the better, and to provide goods at prices that suit the citizen, especially as we are heading to the month of Ramadan in the hope of correcting the mistakes of previous governments."

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