Tripoli based Libyan Prime Minister, Abd Alhamid Aldabaiba, sent an official letter (dated 19 February) to the Governor of the Central Bank of Libya, Naji Issa, calling for a halt to all spending under Chapter Three of the budget. Specifically, the letter called for the stop of all project financing for the 2026 fiscal year, without exception, until full compliance with the provisions of the Unified Development Programme (brokered by the US) is achieved.
Aldabaiba reiterated his warning about the consequences of parallel spending, which has exceeded 70 billion dinars, including a rise in public debt (deficit), resulting in inflation and a decline in the value of the dinar.
He emphasised that development is a right for all Libyans, in the east, west, and south, with the participation of all relevant authorities – provided that financial limits and controls are adhered to, to maintain economic stability.
Background – parallel spending root cause of Libya’s economic crisis
It will be recalled that in his 15th anniversary of the 17 February 2011 Revolution speech last Tuesday (17 February), Aldabaiba blamed the root cause of Libya’s current economic crisis, including the devalued Libyan dinar, rising prices and weakened purchasing power, on parallel spending by the eastern Libyan regime headed by Hafter.
He reminded that he had warned three years ago of the dangers of parallel spending and called for its immediate cessation.
The 300 billion parallel spending by the east has been absorbed as an official public debt
Aldabaiba reported that the volume of parallel spending by the east has exceeded 303 billion dinars and has been officially recognized as part of Libya’s public debt.
LD devalued to pay off public debt
He blamed the recent implementation of the Libyan dinar’s exchange rate devaluation by the Central Bank of Libya (CBL) on the need by the CBL to repay that public debt, which, Aldabaiba added, has once again burdened citizens with the cost.
Aldabaiba explained that most of the hard currency issued by the CBL is consumed by parallel spending in the east, driving up demand for the dollar. In other words, the eastern regime is using the LD over-liquidity in circulation (money supply) to be buy up all the dollars on the black-market at any cost – devaluing the Libyan dinar further and further.
The US brokers a financial agreement has been reached with the Hafter regime
Aldabaiba then revealed that a financial agreement has been reached between the House of Representatives and the State Council (east and west Libya), under the auspices of the CBL.
Aldabaiba expressed his gratitude to the United States and the Trump administration for facilitating the agreement.
He revealed that the agreement grants the CBL the exclusive right to set spending ceilings for development projects, based on financial capacity of the Libyan state
Libya can only afford LD 10 billion per year in development spending
Aldabaiba further revealed that spending by the eastern Hafter regime was 70 billion dinars in parallel spending in 2025, compared to the state’s actual capacity of no more than 10 billion, represents a true catastrophe.
The difference in spending translates into money that puts pressure on the dollar and raises prices and taxes, he explained.
He explained that a budget means allocating available resources according to priorities, not spending without restrictions.
Tripoli government claims it has not overspent or borrowed
Aldabaiba then stressed that his Tripoli government had ‘‘not recorded a single dirham as public debt, nor have we borrowed from banks, even though the law allows it’’.
He further explained that banks in Tripoli hold more than 100 billion dinars, and merchants possess more than another 100 billion, which his government could have but has not utilised for extra spending.
Alluding to the Hafter regime’s huge construction drive in the east at the cost of inflation and a weaker dinar and expensive dollar, he said ‘‘The citizen’s priority today is a strong currency and stable prices before major projects. People don’t eat bridges or stadiums… the priority is a decent life.’’
Aldabaiba calls on CBL to halt all development spending if agreement is not adhered to
It is then in his speech on 17 February that he had demanded that the Governor of the Central Bank of Libya halt all development spending if the US-brokered agreement is not adhered to.
He also reminded that all officially budgeted for state projects pass through the Audit Bureau and the Oversight Authority according to legal procedures.
Continued haphazard spending, he added, affects people’s livelihoods, their medicine and their livelihood.
Aldabaiba pledged to exert every effort to ensure the success of the unified financial agreement for 2026, stressing that adherence to the financial agreement and halting arbitrary spending are essential conditions for overcoming the economic crisis.
The CBL view
Meanwhile, while the CBL agrees with Aldabaiba that the eastern regime is engaged in parallel spending outside the budget, it blames the overspending by both government for Libya’s economic crisis.
In justifying its devaluation of the Libyan dinar on 6 April this year, the CBL said ‘‘The governmental division (between west and east) within state institutions and ministries has led to incompatible and conflicting measures and decisions between the two governments. The absence of a comprehensive and unified economic vision applied across all Libyan territory has weakened the Central Bank’s role in implementing an effective monetary policy.’’
It called on both sides to ‘‘join forces to end the political and institutional division and develop a short-term economic vision with specific objectives that reflects the current state of the Libyan economy, harmonizes macroeconomic policies, and includes the adoption of a unified budget that sets the general budget at levels that avoid further negative impacts on the Libyan economy and the dinar exchange rate, while taking into account the Libyan economy’s absorptive capacity.’’
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