Libya’s central bank announced a 13.3% devaluation of the national currency on Sunday, setting the official exchange rate at 5.5677 dinars to the US dollar, down from the previous 4.48 rate established in 2020. The move, effective immediately, reflects mounting fiscal pressure in a country still divided by political rivalry and struggling to stabilize its economy. The Libyan dinar has long traded at a weaker rate on the black market, with further volatility in recent months stemming from a power struggle over the leadership of the Central Bank of Libya (CBL). That crisis disrupted oil production, the backbone of Libya’s economy, and caused a loss in export revenues.
The standoff was recently resolved through a UN-mediated agreement between Libya’s rival legislative bodies in the east and west, leading to the appointment of a new central bank governor. Despite this progress, Libya’s economic challenges remain severe.
Libya remains politically fractured between the Tripoli-based Government of National Unity (GNU) in the west and the House of Representatives in the east, each maintaining its own institutions and financial apparatus. This division has made national economic planning and fiscal oversight nearly impossible. In December 2023, the United Nations Support Mission in Libya (UNSMIL) urged the rival factions to agree on a common financial framework for 2024, emphasizing the need for transparent spending limits and independent oversight mechanisms.
The dinar’s devaluation is intended to reflect market realities and bring greater fiscal discipline, but it also risks increasing inflation in a country where many rely on imported goods and public sector wages. The central bank’s move underscores the urgent need for political reconciliation and economic reform if Libya is to regain stability and protect its fragile economy from further deterioration.
