In its continued efforts to drive down the black-market exchange rate of the Libyan dinar against major currencies, led by the US dollar, the CBL has continued, almost on a daily basis, to give off the record briefings to various Libya media outlets.
Today, it briefed: ‘‘We are continuing to sell (hard currency) allocations for personal purposes and letters of credit at the same pace as last Wednesday and Thursday. Sales over the past two days reached US$ 780 million for personal purposes and US$ 800 million for letters of credit and remittances.
We are also continuing to grant new (hard currency) approvals and reservations and are preparing to begin cash sales of foreign currency. The bank will announce the mechanism and procedures regulating the sale process for personal and medical purposes’’.
‘‘We will grant foreign exchange Bureaux (Sarafa) the authority to broker the sale of foreign currency for cash for personal purposes, similar to exchange companies, as part of a plan to regulate the exchange market’’.
The CBL also briefed today: ‘‘The Board of Directors of the Central Bank of Libya is expected to approve, during its meeting tomorrow, the mechanism for selling dollars in cash through exchange companies, exchange offices, and commercial banks, while also determining the sales commissions and the amount of funds to be injected into the market.
Sales are expected to resume early next week, coinciding with the issuance of important decisions aimed at preserving the value of the Libyan dinar and contributing to a reduction in the exchange rate on the parallel market’’.
Meanwhile, yesterday, it briefed: The Central Bank’s measures will reduce the margin of speculation between the official dollar price and the market, and the price will decrease to 7.90 dinars per dollar, and the difference will be in favour of cheques and transfers instead of cash ‘‘before the middle of April’’.
Yesterday, the dinar closed at around LD 8.75 per dollar. Today on early trading, it was at LD 8.84 per US dollar – all along way from the LD 10.50 it had reached in March, but still not ‘‘under’’ LD 7 per dollar, as CBL Governor Issa had promised last year.
CBL’s psychological war against the black-market foreign exchange
The frequency of the CBL briefings suggests an ongoing psychological war by the CBL as it is determined to talk up the dinar and talk down the dollar on Libya’s foreign exchange black-market. It is hell-bent on frightening customers and black-market traders from buying dollars at a high price in fear that the CBL will drown the market with dollars, causing the LD to gain value.
A game of roulette between the CBL and the FX black-market?
It is a dangerous game of roulette or brinkmanship between the CBL and the black-market traders. The Iran war and the closure of the Hormuz Straight has sent international crude oil prices soaring, which, it seems, has strengthened the CBL’s hand.
Persistent over-demand for hard currency
However, there is, and has been for years now, a persistent over-demand for the dollar on the Libyan foreign exchange currency black-market. As long as the CBL can continue to feed what seems like insatiable demand for hard currency on the FX market, the LD retains or gains some value. But if the CBL cannot meet this demand, the LD seems to crash quickly.
It is to be seen if the CBL’s new tactics will solve the LD exchange rate problem in the long-term, or if they are simply short-term fixes.
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