Ayoub Al-Farsi, a member of the Central Bank of Libya’s Monetary Policy Committee, noted that there are several reasons why despite all the recent efforts of the Central Bank of Libya (CBL) to bring down the gap between the official and the black-market foreign exchange rate of the Libyan dinar versus the US dollar – it has failed.
Al-Farsi was speaking to Arabic-language Libyan media on the margins of the 5th Arab Savings and Financial Literacy Conference 2026, held in Tripoli from 7 to 9 September.
The conference is being held under the slogan "Financial Intelligence in the Age of Transformations", under the auspices of the CBL and in partnership with the Bahraini MENA Money Foundation.
Al-Farsi notes that this situation is driven by numerous factors; some are within the Central Bank's control, while many others lie beyond its influence or authority.
Libya faces a "black hole" that swallows up these dollars
Al-Farsi explains that, typically, under a fixed or pegged exchange rate regime, Central Bank intervention to increase supply stabilizes prices and restores balance over time. However, Libya faces a "black hole" that swallows up these dollars. Consequently, no matter how many dollars the Central Bank injects, it is difficult to narrow the gap—especially given the failure to adhere to unified development spending plans and, crucially, the absence of financial data.
Lack of financial data
Al-Farsi points out that the absence of financial data holds the key to understanding the disparity between the official and parallel exchange rates. This lack of data suggests massive government spending chasing the dollars injected by the Central Bank; in effect, a limited supply of dollars is being pursued by a vast volume of Libyan dinars.
Phenomenon of dual spending by two competing governments
Al-Farsi adds that once financial data is disclosed at year-end, the scale of public spending will be revealed, confirming the existence of a bloated general budget. This is evident from the continuation of spending without a unified budget and the phenomenon of dual spending by two competing governments. Such conditions are fundamentally incompatible with exchange rate stability, as government spending consistently exceeds revenue.
Astronomical dollars used to import fuel exceeds actual demand
Another factor exerting pressure on the exchange rate is the fuel issue. This file places a heavy burden on both the public budget and monetary policy, as a significant portion of the dollars used to import fuel exceeds actual demand. The figure—which surpassed $1.5 billion in a single month (July)—is astronomical; it deprived the Central Bank of funds that could have been used to defend the value of the Libyan dinar.
A squandering of the Central Bank's assets
Consequently, all these variables—combined with a lack of control over imports, excessive import activity (such as letters of credit), and the absence of proper studies to prioritize goods and determine appropriate quantities—create a situation where exchange rate stability is impossible. These factors represent a squandering of the Central Bank's assets.
A single spending authority, a unified budget and reforms would alter the landscape
If a unified government is formed soon—as the Libyan public anticipates—I believe the situation will change. A single spending authority and a unified budget aligned with revenues, alongside the implementation of reforms, would alter the landscape. These reforms were promised by key economic stakeholders when they urged the Governor to withdraw his resignation.
The full implementation of the Unified Spending Agreement would help
If there is a genuine intention to address these issues, we could see an easing of pressure on the exchange rate. Evidence of this lies in the reaction to the signing of the unified spending agreement; even before it came into effect, the gap between the official and parallel market rates narrowed significantly. Imagine the impact if this agreement were fully implemented across all budget items under a unified government.
CBL fighting fires
I believe this is the only solution—and the one the Central Bank maintains will lead to exchange rate stability. Otherwise, the Central Bank will simply be "fighting fires" rather than formulating policy within a conducive and favourable environment.
Demand exceeds supply
There is no policy coordination regarding spending and exchange rate dynamics; the trend remains consistent with previous years. Consequently, demand exceeds supply, inevitably leading to the emergence of a parallel market.