Libyan Dinar 40 percent appreciation leads to 15 % food price fall January to February: Report

By Sami Zaptia.

London, 20 February 2018:

The latest market monitoring report by REACH confirms reports that the sudden and drastic drop in the black-market exchange rate against the Libyan dinar in January and February has been reflected in a decrease in food prices. The report assessed 33 items in 305 shops over 23 Libyan cities.

After the parallel market exchange rates peaked in December 2017, they fell rapidly in mid-January 2018. The USD/LD exchange rate briefly fell below the 4 LD mark, but has rebounded since. As of 4 February 2018, the USD could be obtained for 5.350 LD on the parallel market – a rate almost 40% lower than in early January, the report said. It has risen to above LD 6 since the report was compiled.

The sudden appreciation of the LD was most likely linked to the Central Bank of Libya’s (CBL) roll out of this year’s family dollar allowance: Each Libyan family is eligible to buy 500 USD at the official exchange rate of roughly 1.350 LD per USD. By early January, the CBL had reportedly paid out 2.8 billion USD to Libyan citizens claiming the allowance. This move increased the dollar supply in the parallel market, as many recipients exchanged their family allowances for Libyan dinars, and thus strengthened the Libyan dinar, the RACH report explained.

The report added that the recent boost of the Libyan dinar occurred amid promising macroeconomic data, increased oil production and a rising oil price, which has given the CBL more room to grant letters of credit at the official exchange rate to importers. This, in turn, decreased the demand for US dollars in the parallel market. Food prices decreased by 14.6%. Libya is heavily dependent on food imports.

Since Libya is heavily dependent on food imports, the report said that many importers are forced to resort to the parallel market to obtain foreign currencies, which meant that the recent changes had a significant impact on food prices.

Across Libya, food prices fell by 14.6% from January to February. While in the west (–23.5%) and east (–14.1%) food prices have markedly decreased, the exchange rate drop has had a lesser impact on food prices in the south (–4.0%).

Food prices fell in all assessed locations. The largest price decreases were observed in Zliten (–29.2%), Gharyan (–28.1%) and Ajdabiya (–27.0%). Nearly all monitored food items decreased in price. The price reductions were particularly pronounced for tomatoes (–41.7%), sugar (–35.0%), potatoes (–33.3%) and eggs (–30.4%).

Non-Food Item (NFI) prices fell in the east and west, rose in the south Like food items, the vast majority of non-food items are imported. NFIs have thus fallen in price since January (–10.0%). Broken down by region, a decrease was found in the east (–8.9%) and west (–15.4%), while NFI prices rose in the south (+11.9%).

Since NFIs are not perishable and are easy to store in large quantities, it is likely that traders have drawn from their stocks rather than relied on recent imports. The exchange rate drop has therefore not yet translated into a substantial reduction in NFI prices across the whole country.

https://www.libyaherald.com/2017/12/29/libyan-dinar-continues-to-lose-value-and-prices-continue-to-rise-report/

https://www.libyaherald.com/2017/10/29/libyan-food-prices-increased-by-11-percent-since-june-a-report/