Speaking about corruption in Libya’s Letters of Credit file, in an interview with Istanbul-based Libyan satellite TV channel, Libya Al-Ahrar, Libya’s Attorney General Sideeg Al-Sour said:
– Assigning a specialized company to track supply chains could eliminate irregularities in the letters of credit system.
– Developing countries, which suffer from high levels of corruption, rely on tracking companies to monitor shipments, verify the safety of goods, and confirm the legitimacy of suppliers.
– Some businesspeople, customs officials, and traders are resisting the assignment of a tracking company because it might also uncover money laundering crimes.
– The widening exchange rate gap between the Libyan dinar and hard currency has created an opportunity for the misuse of the currency.
– Arrest warrants had been issued for those involved in the letters of credit violations, and their bank accounts had been frozen.
– Those found guilty would be required to reimburse the value of the damages resulting from the misuse of the letters of credit.
– The amount recovered through prosecution proceedings against those found guilty has reached 257 million dinars.
– Some banking officials and others in the Customs Authority are involved in facilitating the letters of credit violations.
Background
The Attorney General’s comments come within the wider framework of the Libyan state trying to fight corruption, money laundering, defend the value of the Libyan dinar, control inflation and defend standards of living, by reducing the demand for hard currency on the black-market foreign exchange.
The background to the Attorney General’s comments are:
– The Central Bank of Libya (CBL) 2025 data, released on 19 January, revealing a hard currency deficit of US$ 9 billion in Libya’s budget. This hard currency deficit has persisted for successive years eating into Libya’s finite hard currency reserves.
– Falling international crude oil prices and Libya’s inability to raise its oil production beyond the 1.5 million barrels per day mark. This means that Libya’s average annual hard currency revenues remain flat, if not decreasing due to world crude prices.
– A seemingly insatiable appetite by Libya’s hard currency black-market for the US dollar. This is feeding a rentier, undiversified, non-value-added, non-manufacturing, consumer economy.
– An increase in ‘fake’ imports whereby importers present invoices to open letters of credit (at the lower official exchange rate) for high value goods but import very low-value goods such as salt or hollow concrete blocks.
– The balance of the unused dollars are then sold on Libya’s hard currency black-market taking advantage of the differential between the lower official exchange rate and the higher black-market rate.
– This insatiable demand for the dollar on Libya’s black-market and the wide exchange differential has pushed prices up (imported inflation), reducing the standard of living of Libyan citizens.
– The Minister of Economy has revealed that many LCs are opened to import products (such as sugar) that are illegally exported to neighbouring countries. These are imports and LCs that put pressure on the value of the Libyan dinar and increase demand for the US$ on Libya’s black-market – without benefiting the Libyan citizen or state. As a result, truck shipments of commodities are being intercepted by the police and prevented from heading to neighbouring countries across the desert routes.
– In an attempt to correct this foreign exchange gap, the CBL devalued the Libyan dinar on 18 January from LD 5.43 to LD 6.36 per US$. However, the black-market rate has subsequently shot up to over LD 9 per dollar – maintaining an unhealthy differential.
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CBL devalues LD by 14.7% from approximately LD 5.43/dollar to about LD 6.36/dollar
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