9 April 2025: CBL devalues dinar to 5.56 LYD and warns about dual government overspending
This week we look at the devaluation of the Libyan dinar, as well as the ISA shutting down foreign NGOs over their work with migrants and the NOC's London leg of its bidding round roadshow.
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CBL devalues dinar to 5.56 LYD to 1 USD and warns about overspending by both governments, calling for a unified budget to be agreed
Incident: On 6 April, the Central Bank of Libya (CBL) announced the reduction of the exchange rate of the Libyan dinar against foreign currencies by 13.3%. The value of the dinar was adjusted from 0.1555 Special Drawing Units per Libyan dinar to 0.1349, so that the value of the dinar against the US dollar became 5.5677 dinars per dollar. The 15% Forex tax also remains in place on top of this.
On the same day, in advance of the devaluation decision, CBL Governor Naji Essa issued a long statement warning about the concerning state of the Libyan economy and citing expanded public spending as a major driver.
The CBL Governor made these key points:
The spending of the two rival governments in 2024 was LYD 224 billion, including LYD 123 billion for the Government of National Unity (GNU), LYD 59 billion for the Government of National Stability (GNS), and LYD 42 billion for crude-for-fuel swaps. Meanwhile, oil and tax revenues reached only LYD 136 billion, generating a demand for foreign currency worth USD 36 billion which the CBL said contributed to the widening imbalance between the demand and supply of currency and destabilizing the exchange rate.
The expansion in dual public spending over the past years and through 2024 has led to a significant increase in the cash supply, reaching LYD 178.1 billion. This will have ‘several negative economic impacts’ and pose challenges to the bank around the exchange rate and the risk of losing confidence in the local currency.
The decline in oil export revenues supplied to the CBL, which amounted to only USD 18.6 billion in 2024, and the increase in foreign currency expenditures to USD 27 billion, resulted in a large gap between the demand for foreign currency and its availability, making it difficult for the CBL to define a clear policy for managing the exchange.
Given the continued issuance of spending decisions by the two governments during 2025 based on the 1/12 formula, the continued expansion in public spending at the same pace as in 2024, and the inability of oil revenues to cover the spending, the public debt balance will increase.
Total foreign currency expenditures for the first quarter of 2025 amounted to about USD 9.8 billion, while oil revenues and royalties transferred to the bank amounted to about USD 5.2 billion as of 27 March, representing a deficit of about USD 4.6 billion in just three months. The CBL stressed that ‘the matter will become more dangerous if oil production and export rates decline due to any variables, or if global oil prices deteriorate.’
The expansion in public spending has exacerbated the level of public debt outstanding at the CBL in Tripoli and Benghazi, which currently reaches nearly LYD 270 billion. The Benghazi branch of the CBL holds LYD 186 billion in debt and the Tripoli CBL holds LYD 84 billion. The total debt is expected to exceed LYD 330 billion by the end of 2025, given the absence of a unified budget and spending at the same pace as in 2024.
To reduce the gap between demand and supply of foreign currency and the balance of payments deficit, the CBL was forced to use part of its foreign exchange reserves for a limited period to maintain the stability of the exchange rate at acceptable levels, maintain the prices of goods and services, and limit the spiralling inflation rate. However, the use of reserves is unsustainable in the longer term.
According to the CBL, total foreign assets stand at over USD 94 billion, including USD 84 billion in reserves managed by the CBL - it promised to safeguard these reserves despite the significant challenges and the volatile environment in which it operates.
The inability to combat and limit the smuggling of goods and fuel has contributed to the exacerbation of the crisis due to the increased demand for imported goods and fuel and the depletion of foreign currency available to the CBL. Furthermore, the CBL said the phenomenon of the rising number of informal expatriate workers and illegal immigration drains nearly USD 7 billion annually, increasing the rate of consumption of goods and demand for foreign currency in the parallel market and fuelling illegal activities and the expansion of money laundering and terrorist financing in this market.
Based on the above, the CBL said it was forced to take a series of measures, including reviewing the exchange rate, to ensure the creation of balances in the economic sectors in light of the absence of prospects for unifying dual spending between the two governments. The CBL called on the legislative and executive authorities in the country to intensify efforts to end the political and institutional division and develop a short-term economic vision, including the approval of a unified budget; it also called to take measures limiting the phenomenon of smuggling goods and fuel to neighbouring countries, and the phenomenon of foreign currency speculation on the black market.
Libyan political actors have responded to the CBL statement, expressing concern and condemnation over the deteriorating economic situation.
On 6 April, the GNU emphasised that the GNS spent LYD 59 billion in 2024, which was outside the official state frameworks. The GNU stressed that this spending constitutes ‘a direct burden on the national economy, leading to the depletion of cash reserves, an increase in public debt, a deterioration in the value of the dinar, and an increase in prices, negatively impacting citizens’ livelihoods’. In response, the GNS has refuted the Tripoli government’s attempt to blame it for Libya’s economic troubles.
On 6 April, one of the rival High State Council (HSC) heads Khaled al-Mishri highlighted concern over the CBL’s monetary decisions and called for reduced government spending and a unified budget. He stressed that the root solution is the formation of a unified government and called on the HoR to hold an urgent meeting with it and the CBL Governor to review the problem.
Meanwhile, the other HSC head Muhammed Takala expressed his deep concern and condemnation of this deteriorating situation and affirmed that ‘the parallel government in the east of the country is an illegitimate entity and does not enjoy any international or local recognition. Therefore, enabling it to access and spend public resources is a flagrant violation of the financial laws and regulations in force in the Libyan state.’ As such, Takala said he holds the CBL directly responsible for the expansion of uncontrolled public spending and called on the Audit Bureau and the Administrative Control Authority to open an urgent investigation into how these expenditures were passed and by whom.
On 7 April, the Presidential Council (PC) issued a statement agreeing with the CBL that the ‘dual government spending has created an unprecedented financial and economic situation that the monetary authority in the state is unable to manage with the monetary and legal tools available to it.’ The PC stressed that the current financial imbalance cannot be remedied by devaluing the national currency as it will not be reflected in a decrease in demand for hard currency, as the CBL hopes, but rather will lead to an increase in demand for hard currency, given that this measure will directly impact increased government spending during the following fiscal year.
The PC called on the House of Representatives (HoR) and High State Council (HSC) to agree on a general budget law and end the duplication of public spending, or in the event of a delay to reactivate the High Financial Committee, as it is ‘a temporary financial framework resulting from a serious national dialogue supported by international resolutions’, with the aim of limiting the continuing deterioration in the financial and monetary situation in the country.
On 7 April, the HoR Speaker Aqeela Saleh invited HoR members to an official session on 15 April to discuss the situation related to the CBL and to hear a briefing from the CBL Governor regarding his recent statements and the decisions and measures taken to manage the financial and economic situation.
Comment: The PC said it does not absolve the previous CBL administration of responsibility for helping to create uncontrolled and unregulated government spending, citing its refusal to allow the PC to prepare emergency financial arrangements after it was confirmed that the 2021 general budget had not been approved by the legislative authority. The PC also noted that the financial statements issued by the CBL and the GNU indicate that government spending has exceeded what is required by the 1/12 financial exception by increasing multiples over the past years. The PC did however appear to absolve the current management of responsibility for creating these conditions and stressed its support for the current CBL management.
This is the first official devaluation since the CBL agreed to a devalued exchange rate of 4.48 dinars to the dollar in 2020. In September 2024 the dinar slid against the US dollar in the black market due to the CBL crisis which slashed oil output and exports, and which was only solved with the appointment of Naji Essa as CBL Governor and a new board of directors. Earlier in the year, then-Governor Sadiq al-Kabir had persuaded the HoR Speaker Aqeela Saleh to impose a 27% tax on foreign currency purchases as a way to unofficially devalue the Dinar. This was later dropped to 20% and then to 15% after Essa took over. The black market exchange rate is around 7.2 LYD to 1 USD as of 8 April.
Significance: As L-A has been reporting for many months, Libya’s current economic trajectory is unsustainable, with government spending rising, oil revenues falling, the foreign currency deficit ballooning, and the value of the dinar weakening. Naji Essa’s lengthy statement was designed to shift the blame away from the CBL and on to the GNU and GNS (and their patronage networks). However, while the overspending by both authorities, as well as the deep-seated corruption and smuggling networks, are key drivers of the crisis, Essa must also take some responsibility for the increased spending since he took office. The deteriorating economic conditions have forced Essa and the CBL Board to devalue the dinar in an attempt to bring the exchange rate under control, but as highlighted by several actors, this is unlikely to have the desired effect in the short-medium term unless the drivers of the crisis are addressed.
Essa likely hopes that this statement will put pressure on the relevant actors to either rein in their spending organically or to agree to some sort of unified budget or financial mechanism. However, there is little incentive for the GNU or GNS to limit their spending – they will want to keep accessing Libya’s funds for as long as they can. Similarly, the HoR will be reluctant to approve any kind of budget or mechanism which gives the GNU any legislative right to funds, as that will further derail efforts to remove PM Dabaiba, while the HSC (such as it is) will not want to legitimize the GNS.
As such, the only tool really available to Essa to force these actors to reduce spending is to threaten to cut off their access to funds, other than for essentials, as Kabir did in 2023 and 2024 for the GNU. However, that led to the CBL crisis and the forced removal of Kabir, so Essa is likely to be nervous about taking such drastic action. International pressure on Essa and on the Libyan political actors is only likely to result in progress on this front if there is some threat of consequences or sanctions if they do not comply. To date, such pressure has been rare and it is therefore unclear whether international engagement will have much impact on the situation.
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ISA shuts down ten foreign NGOs for unauthorized support to migrants; Italy approves 20 million EUR fund to support voluntary returns from Libya
Incident: On 2 April, Internal Security Agency (ISA) spokesman Salem Ghaith said in a press conference that the ISA in Tripoli had taken deterrent measures and closed the headquarters of a number of NGOs after monitoring their ‘transgressions’. The ISA accuses these NGOs of engaging in ‘hostile foreign activities’. Their activities are considered a threat to Libya's national security and sovereignty and its internal stability. The ISA claims that these NGOs have been exploiting the instability in Libya to further foreign agendas. Specifically, the NGOs are accused of participating in a plan to settle illegal migrants within Libya. They are also accused of financial irregularities, including money laundering and suspicious financial transfers. Some violated legal standards for medicine storage.
NOC and MOOG hold London Bidding Round event, outlining qualification and scoring criteria for bids
Incident: On 7 April, the National Oil Corporation and the GNU Ministry of Oil (MOOG) held their third Bidding Round (BR) roadshow event in London (following events in Tripoli and Houston, USA). The event was hosted by the Libyan British Business Council and was well attended. The Acting NOC Chairman Masoud Suleiman and the Acting GNU Oil Minister Khalifa Abdul Sadiq both gave keynote addresses, reiterating key points made on previous occasions. Suleiman reiterated that the NOC and MOOG were working together on the BR and Abdul Sadiq stressed that the ‘increased stability’ in Libya was a key foundation for a prosperous energy sector. He said that Libya is ‘open for business’ and the energy sector has a strategy for modernisation.
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ISA shuts down ten foreign NGOs for unauthorized support to migrants; Italy approves 20 million EUR fund to support voluntary returns from Libya
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