Libya’s central bank has announced a 13.3% devaluation of the national currency, setting the new official exchange rate at 5.5677 dinars to the US dollar, effective immediately. This marks the country’s first official devaluation since 2020, when the exchange rate was previously set at 4.48 dinars per dollar.
The decision, announced on Sunday, comes amid ongoing efforts to stabilise Libya’s fractured economy, which has long been marred by political turmoil and institutional divisions.
The new rate still lags behind the parallel market, where the dinar currently trades at 7.20 to the dollar. The widening gap between official and black-market rates reflects persistent uncertainty and lack of confidence in Libya’s financial system.
Libya’s economic challenges are closely tied to its political instability. Since the 2011 NATO-backed uprising that ousted Muammar Gaddafi, the country has remained divided between rival administrations in the east and west. In 2014, this divide deepened, resulting in competing governments, each with separate financial institutions and budgets.
In September 2023, the dinar weakened sharply in the black market amid a standoff over control of the central bank, which significantly reduced oil output and exports—the lifeblood of Libya’s economy. The crisis was resolved later that month through a UN-brokered agreement between Libya’s eastern and western legislative bodies, leading to the appointment of a new central bank governor.
Despite the truce, Libya continues to face major fiscal pressures. The central bank reported that government spending reached 224 billion dinars ($46 billion) in 2024, with 42 billion dinars allocated to crude-for-fuel swap deals. Meanwhile, public debt has ballooned to 270 billion dinars and is projected to exceed 330 billion by the end of 2025 in the absence of a unified national budget.
In an effort to ease currency pressure, the eastern-based parliament speaker in November reduced the tax on foreign currency purchases from 20% to 15%. The tax is applied when citizens purchase foreign currency through commercial banks.
The UN has urged Libyan leaders to implement better fiscal discipline and transparency. In December, Stephanie Koury, Deputy Head of the United Nations Support Mission in Libya (UNSMIL), called on the country’s authorities to urgently agree on a national spending framework for 2025 with clear limits and oversight mechanisms.
The latest currency devaluation underscores the fragility of Libya’s financial position and the pressing need for political unity and economic reform. Whether the move will help stabilise the dinar and restore confidence in the Libyan economy remains uncertain.
Melissa Enoch
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