24 Hrs
Source:
عين ليبيا
Libya's official dollar rate faces failure
The article discusses the failure of the administrative pricing experiment for the Libyan dinar over the past decades, emphasizing that the value of a currency is not determined by an official decision but by support through production, revenues, foreign reserves, fiscal discipline, and popular trust. It clarifies that repeated adjustments to the official exchange rate since 1982 have not reduced the gap with the parallel market, reflecting ongoing high demand for dollars due to budget deficits, subsidy policies, and reliance on imports. The article points out that financing the deficit creates a larger money supply, which widens the gap between the official and parallel rates and creates profit opportunities for those who acquire dollars at the subsidized rate. It confirms that weak oversight and political interventions have led to a fragmented foreign exchange market. Expectations of a devalued dinar prompt institutions and individuals to buy dollars as a hedge. The article proposes establishing a unified and transparent currency market and easing restrictions to reduce the parallel market, along with improving public financial management and strengthening trust in the local currency to ensure exchange rate stability and balance supply and demand. It concludes that the success of neighboring countries in stabilizing their exchange rates is due to building strong financial systems, and Libya needs similar reforms to achieve currency stability.
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