The 6th Annual Libyan Banking Sector Development Forum (SDF) held in Tunis from 7 to 8 December concluded optimistically yesterday with a set of strong recommendations. The optimism stems from the existence of a unified Central Bank of Libya (CBL) Board and the CBL’s strong participation in the Forum. The CBL’s representatives engaged in open, constructively critical debate with participants showing a true desire to enact reform.
The event brought together high-level participation from leading public officials, central banking experts, commercial banks, and economic stakeholders for two days of intensive and constructive dialogue on the future of Libya’s monetary and financial system.
The high-level participation included the Deputy Speaker of the House of Representatives, Fawzi Nweri, UNSMIL Deputy Representative to DECF, Ms. Ulrika Richardson, Members of the Board of Directors of the Central Bank of Libya, Fakher Bufranna and Reda Gargab, CBL General Manager for Statistics and Advisor to the Governor, Ali Abousalah.
CBL Governor Naji Issa launches three strategic initiatives
During the event, Ali Abousalah delivered CBL Governor Naji Issa’s keynote speech. During this speech, Issa announced the launch of three strategic initiatives to build a stronger and more effective Libyan banking sector.
1-The National Advisory Team for Financial and Economic Reform
These initiatives include the formation of a National Advisory Team for Financial and Economic Reform, comprising a select group of Libyan bankers and experts, to provide technical advice and formulate future financial and economic policies.
This initiative will be much welcomed by experts in the field as it allows for input into the CBL’s policy formation process from outside it. Under the previous Governor, there was no serious interaction or input with external ideas or proposals. It will act as a sounding board for the CBL.
2-The “Zero Cash” initiative
The second initiative, as part of its efforts to address liquidity challenges and enhance financial inclusion, the CBL announced its full support for the “Zero Cash” initiative. This initiative aims to accelerate digital transformation by guiding 100 major companies towards eliminating cash transactions and fully transitioning to electronic payments, while providing the necessary incentives to ensure the success of this important step.
The speaker said this initiative is in line with the CBL’s National Financial Inclusion Strategy 2025–2029, which aims to provide safe, easy and accessible financial services for all through digitization and the development of an integrated digital financial infrastructure, thereby promoting the building of a sophisticated digital economy capable of supporting stability and development in Libya.
Speakers noted that while ‘‘Zero Cash’’ is a noble target, Libyan society, the general economic, fiscal and monetary infrastructure beyond the realm of the CBL’s influence may make it a mid to long-term aim. They pointed out that many Libyans do not have a bank account.
3-The Excellence in Banking Performance Award
Finally, the Central Bank of Libya also approved the launch of an Excellence in Banking Performance Award for individuals and institutions, in recognition of professional excellence and innovation in the banking sector.
Panels engaged in transparent, sometimes heated and constructive discussions
Across five discussion panels, participants engaged in transparent, sometimes heated but highly constructive discussions focused on the core duties of the CBL, fiscal discipline, structural reforms, and exchange-rate policy.
- Central Bank Duties and Monetary Financing Concerns
Speakers reaffirmed that the CBL’s foremost obligations are: - General price stability
- Containing inflation
- Sound regulation as the bank of banks and the government’s banker
CBL may not finance more than 20% of a government fiscal deficit
Panellists emphasized the legal requirement that the CBL may not finance more than 20% of a government fiscal deficit, and that such financing must be settled by the end of the following year.
It was noted with concern that from 2012 to 2023, CBL financing exceeded the legal threshold tenfold, estimated at over 300 billion Libyan dinars.
CBL must cease all forms of monetary financing
The Forum unanimously called on the CBL to cease all forms of monetary financing, including money creation and extraordinary advances to the government, due to their direct inflationary and destabilizing impact on the exchange rate and financial stability.
- Libya’s Fiscal Pressures: Fuel, Wages, Subsidies, and Operational Spending
Another panel highlighted Libya’s challenging expenditure structure:
- 77 billion LD – Fuel bill growing yearly by 10% since 2019
- 70 billion LD – Wage bill growing yearly by 10% since 2022
- 18 billion LD – Other Subsidy Items
- 14 billion LD – Operating budget
Only 15 % of budget left for development
These items leave less than 15% of total spending available for development—an imbalance that panellists deemed unsustainable.
Arbitrage, speculation, and smuggling costing LD 100 billion or 50% of budget
Experts estimated that arbitrage, speculation, and smuggling cost the country approximately 100 billion LD, equivalent to nearly 50% of the official budget, using an average exchange rate of 6.250 LD/USD.
Fixed peg of the Libyan dinar to the SDR has yielded 70 years of failed monetary outcomes
Speakers warned that the fixed peg of the Libyan dinar to the SDR has yielded 70 years of failed monetary outcomes, noting that the dinar, valued at 3.30 USD in 1982, has lost 95% of its value, with current exchange rates exceeding:
- 6.250 LD/USD (official)
- 8.450 LD/USD (parallel cash)
- 9.200 LD/USD (parallel cheques)
- Bank-Owned Holding Companies and the Need for Structural Reform
A forward-looking panel discussed the launch of bank-owned holding companies as a mechanism to stimulate investment, finance development projects, and reduce reliance on the budget. This move is to bypass the existing law that does not allow banks to invest more than 10 % in an investment company.
Commercial banks, however, stressed that meaningful progress requires urgent activation of:
- A national land registry
- Urban and land planning frameworks
- A functional credit bureau
Without these foundations, banks argued, serious investment and credit expansion will remain constrained.
- Exchange-Rate Policy: The Need for a New Approach
Prominent business leader Husni Bey delivered a detailed analysis of the contradictions within Libya’s fiscal and external accounts, noting:
- Net monthly revenues fall below the 2.4 billion USD “alarm threshold” when Brent crude averages 65 USD per barrel, including a fuel import cost of 660 million USD monthly.
- Under the oil-for-fuel barter system, net revenues dropped to 1.76 billion USD per month before May 2025.
- CBL data showed a 7.8 billion LD fiscal surplus, but simultaneously a 7.8 billion USD balance of payments deficit, despite total foreign reserves rising to 99.5 billion USD, including 20.05 billion USD in gold.
These inconsistencies, he noted, raise fundamental questions: If both the fiscal surplus and external reserves increased, why did neither the exchange rate nor money supply stability improve? The core issue is not the exchange rate level itself, but the long-failed fixed exchange-rate policy, which has repeatedly created price gaps enabling:
- 20% guaranteed profit in cash arbitrage
- Over 25% profit via “cheque burning”
Dinar has become a speculative commodity rather than a monetary instrument
Speakers warned that the dinar has become a speculative commodity rather than a monetary instrument, repeating cycles of arbitrage seen in 1992–2002, and again in 2015–2018, when parallel-market premiums reached 600% in cash and 1000% in cheques.
Devaluation is not the solution
With the exchange rate at ~6.250 LD/USD, further adjustment is unnecessary and potentially harmful.
The real solution is reforming currency-sales policy, including transparent, regular FX auctions to shut down speculative opportunities.
Organizing and modernizing the FX market is more important than adjusting the fixed rate, and is essential for protecting reserves, stabilizing the economy, and ending the dominance of speculators.
A speaker stated: “There is no growth through an impoverished population. Do not expect development from a people who cannot meet their daily obligations.”
- The Call for a New Economic Paradigm
Across all panels, experts agreed that:
- Libya cannot return to pre-crisis monetary conditions after financing over 300 billion LD in deficit spending.
- Stability must be built from the current reality, not an ideal past.
- When oil and gas revenues fall below 2.4 billion USD per month, a national economic alarm bell must be triggered.
Reviewing CBL’s valuation of Libya’s US$ 99.5 billion foreign assets, including 148 tonnes of gold.
The Forum also reviewed CBL’s valuation of Libya’s foreign assets, totalling 99.5 billion USD, including 148 tonnes of gold.
While these reserves provide a cushion, participants insisted that policy reform—not reserve depletion—must be the basis of stability.
Conclusions
The Banking Sector Development Forum in Tunis concluded with a unified message:
Libya urgently needs a shift from static, outdated monetary frameworks to dynamic, transparent, rules-based policies capable of restoring confidence, reducing corruption, and supporting sustainable development.
Participants praised the Forum as a critical step in aligning national financial institutions, commercial banks, and international partners around a shared recognition: Economic stability cannot be achieved without disciplined monetary policy, structural reforms, and a transparent, well-regulated exchange-rate system.
The 6th Banking Sector Development Forum will be held in Tunis from 7 to 8 December
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Annual Libyan Banking Sector Development Forum to be held in Tunis (libyaherald.com)
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