By Sami Zaptia.
London, 14 May 2016:
The black market dollar exchange rate fell below the psychological four-dinar rate last week after . . .[restrict]spending part of the week at near-record rates.
A foreign exchange trader, who insisted on anonymity, told Libya Herald yesterday that the failure of Prime Minister-designate Faiez Serraj and his Presidency Council/Government of National Accord (PC/GNA) to affect change on the ground and the perceived threat to the oil crescent, contributed to the dinar’s gain in value.
Moreover, he said that when the dollar costs more than the psychological LD 4 mark, many Libyans cannot afford it or perceive it as expensive, and demand falls. He confirmed that demand had tapered off last week.
He also reported that a prominent Dubai-based foreign exchange dealer working with Libyans had his business frozen by Dubai authorities. A number of Libyan exchangers’ activities were affected by his shutdown.
The dollar was exchanging for as low as LD 3.70 at one point last week. Today it was being exchanged for LD 3.80. The official exchange rate is LD 1.30 to 1.40 for the dollar. On 2nd April, three days after the Tripoli arrival of Faiez Serraj and his PC/GNA, the dollar was exchanging for as low as LD 2.70.
It will be recalled that the poor fundamentals of the Libyan economy still persist. Libya’s oil production is still down to 27 percent of its 2012 peak causing a drastic drop in state revenues and an on-going budget deficit.
The foreign currency reserves used to make up the deficit are fast depleting to three years’ cover. The loss of confidence in the Libyan economy has led to a cash shortage as Libyans have chosen to hoard their cash at home. [/restrict]