Every year, in and around the fasting month of Ramadan (which started on 1 March), the subject of the low purchasing power of Libyan citizens, the high price of goods, especially foodstuffs, inflation and the low exchange rate of the Libyan dinar against major hard currencies returns as the major topic of discussion.
Speaking to Libyan news outlet Fawasel about the low purchasing power of the Libyan dinar, its exchange rate against the US dollar and inflation, Libyan businessman Husni Bey said:
- The low purchasing power of the Libyan dinar is the main cause of inflation, not just high prices.
- The rise in the dollar exchange rates in the parallel / black market reflects the depreciation of the Libyan dinar.
- Citizens contradict their demands, demanding on the one hand a rise in the dollar exchange rate to take advantage of price differences, while criticizing the rise in prices.
- The real price is the market price that determines the price of any commodity or currency by market mechanisms (supply and demand), even with government intervention in setting prices.
- Libyan law prohibits setting prices except in specific cases (quasi-governed articles).
- The dollar is the master of prices in Libya and finances 93% of government expenditures (from oil export revenues), making its price in the parallel market the real price, while the official rate set by the Central Bank of Libya is just an indicator.
- The gap between the official and parallel rates (currently at more than 12%) increases the demand for the dollar for speculation, reflecting a deficit in the public budget.
- Solving the problem requires unifying the budget (between the split west and east of Libya) and rationalising public spending.
- The official dollar exchange rate cannot be reduced as long as government spending exceeds revenues.
