As the black-market exchange rate of the Libyan dinar plunged to unprecedented rates over the LD 10.50 to the dollar yesterday, and the leadership of the House of Representatives (HoR), in collusion with the Central Bank of Libya (CBL), attempted to force-through taxes on imports without parliamentary or government approval, the Tripoli based Libyan government, led by Abd Alhamid Aldabaiba, blamed the dinar collapse on Hafter’s parallel spending outside the approved budget.
In its statement yesterday on Libya’s runaway economic crisis, the Tripoli government said addressing the exchange rate crisis begins with controlling parallel spending, not imposing new tax burdens:
Rejects proposed new taxes on imports
‘‘The Government of National Unity announces its categorical rejection of the unilateral steps taken by the Presidency of the Interim House of Representatives that affect the state’s fiscal and monetary policy. Foremost among these steps is the initiation of procedures to impose a tax on imported goods by including them in foreign currency sales or letters of credit, without coordination with the relevant executive authority or a Cabinet decision.
Move would disrupt markets and deepen economic crisis
The government affirms that taking measures that directly impact the exchange rate and price levels outside the executive branch’s purview constitutes a violation of the principle of separation of powers and leads to market disruption and deepened economic uncertainty.
Core cause of collapse of the dinar is Hafter’s parallel spending outside the approved budget
It also emphasizes that the core of the dollar exchange rate crisis is fundamentally linked to parallel spending outside the approved budget, which has reached levels several times exceeding the absorptive capacity of the national economy, surpassing the state’s actual ability to finance without harming monetary stability.
Taxes will not address the root cause of the problem; rather compound the problem
This has resulted in inflation of the local money supply without sufficient productive backing or foreign reserves, generating excessive demand for foreign currency and escalating pressure on the exchange rate. Therefore, imposing additional burdens on imported goods will not address the root cause of the problem; rather, it will directly impact their prices and increase the burden on citizens.
Solution to crisis is adherence to the Unified Development Programme
The government believes that the real solution begins with strict adherence to the (US-brokered) Unified Development Programme, which serves as the framework for regulating public spending across all regions of Libya, through the relevant executive bodies, and within a realistic financial ceiling that aligns with the capacity of the national economy and preserves monetary stability’’.
Background to the crisis
The 300 billion parallel spending by the east has been absorbed as an official public debt
It will be recalled that Aldabaiba recently reported that the volume of parallel spending by the eastern Hafter regime 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 US-brokered 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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107 HoR members state that they have not issued the decision to impose new import taxes
CBL devalues Libyan dinar by 13.3 percent to LD 5.56 per dollar
CBL’s latest revenues and spending data reveals a dinar surplus but a dollar deficit
