TRIPOLI, Libya — Libya’s central bank has officially devalued the country’s currency by more than 13 percent, a significant move aimed at addressing deepening fiscal challenges amid ongoing political divisions and spiraling debt. The exchange rate for the Libyan dinar has now been set at 5.5677 per US dollar, down from the previous rate of 4.48. The new rate takes effect immediately, marking the first official devaluation since 2020.
The decision comes as the North African nation grapples with intensifying financial strain, an unresolved political crisis, and stalled efforts to unify governance structures that remain split between rival eastern and western administrations.
A Strategic Devaluation
The devaluation, announced Sunday, is intended to stabilize Libya’s official exchange markets and curb the growing disparity between official and black-market rates. In recent months, the dinar has traded at significantly weaker levels on the parallel market, driven by uncertainty surrounding the country’s central bank leadership and disruptions in oil output — Libya’s primary source of revenue.
While the central bank has not explicitly stated its reasons for the move, analysts say it is likely a response to widening fiscal imbalances, ballooning public debt, and mounting pressure from international partners to adopt unified financial policies.
“This adjustment is a reflection of the reality on the ground,” said Mahmoud Eljazi, a Tripoli-based economist. “The gap between official and black-market exchange rates had become untenable, and this move signals a desire by the central bank to regain some level of credibility and control over the financial system.”
Fallout of Political Fragmentation
Libya has remained politically fractured since the 2011 uprising that led to the fall of longtime ruler Muammar Gaddafi. In the aftermath, competing governments emerged in the east and west, each backed by their own militias and foreign allies. The resulting political gridlock has paralyzed state institutions, including the Central Bank of Libya (CBL), and undermined national economic management.
That paralysis took a critical turn last year, when a power struggle over the control of the central bank disrupted oil production and exports — a vital economic lifeline. With oil revenues sharply reduced, Libya’s fiscal position deteriorated rapidly, pushing the country toward this latest monetary adjustment.
The situation improved only after a UN-mediated agreement brought together rival legislative bodies to install a new central bank governor. The appointment has since helped restore some functionality to the CBL and opened the door for policy reforms.
Mounting Debt and Uncontrolled Spending
In its Sunday statement, the central bank warned of a looming fiscal crisis if a unified national budget is not adopted soon. The bank reported that Libya’s two rival governments spent a combined total of $46 billion in 2024. Meanwhile, public debt has soared to nearly $56 billion and could surpass $68 billion if current spending trends continue unchecked.
The central bank’s statement served as both a warning and a plea for coordinated governance. “A failure to consolidate fiscal planning and adopt a single national budget framework will threaten Libya’s economic stability,” the bank said.
The UN Support Mission in Libya (UNSMIL) echoed this concern in December, urging both administrations to agree on a spending framework for 2025 that includes oversight mechanisms and expenditure limits. However, no formal agreement has yet been reached, leaving Libya’s financial system in a state of flux.
Black Market Pressures
Despite the official devaluation, the Libyan dinar continues to perform poorly on the black market, where demand for hard currency far exceeds supply. In the informal market, the dinar has recently traded as low as 7.0 to the dollar, driven by persistent uncertainty and a lack of public confidence in the state’s monetary policies.
Currency traders and importers rely heavily on black-market rates due to limited access to official channels, where hard currency remains tightly regulated. This dual exchange rate system has further distorted the economy, widened income disparities, and created fertile ground for corruption and smuggling.
“The devaluation alone won’t fix Libya’s currency crisis,” said Hanan Othman, an economic analyst based in Benghazi. “Without real fiscal reform and political consensus, the black market will continue to dictate economic reality for most Libyans.”
Impacts on Daily Life
For ordinary citizens, the devaluation is expected to trigger a rise in the cost of living. Libya is heavily reliant on imports for basic goods, including food, fuel, and medicine. With the dinar now officially weaker, prices for essential commodities are likely to increase in the coming weeks.
This could exacerbate existing social pressures in a country where nearly a third of the population lives in poverty, and where inflation has already been on the rise. Public services remain unreliable, and many government salaries are paid irregularly, adding to the population’s economic woes.
“The government needs to act quickly to protect vulnerable households,” said Amal Benhalim, a humanitarian worker with an NGO operating in Tripoli. “Subsidy reform, targeted cash transfers, and improved service delivery must accompany any currency adjustment.”
The Road Ahead
The central bank’s decision signals a potential shift toward more coordinated and realistic economic policymaking. However, analysts warn that without broader political reconciliation and institutional reform, Libya’s economy will remain highly vulnerable.
Experts also caution that devaluation alone cannot substitute for deep structural reforms, including banking sector modernization, transparency in oil revenue management, and a coherent national development strategy.
“If this devaluation is the beginning of a broader reform effort, it could stabilize the economy,” said Eljazi. “But if it’s an isolated move without follow-through, Libya risks entering a deeper economic crisis.”
With a new central bank governor in place and renewed international attention on Libya’s economic health, there may be an opportunity for change. But for meaningful progress to occur, Libya’s fractured political leadership must prioritize fiscal unity, transparent governance, and the long-term welfare of its citizens.
As Libya steps into another uncertain fiscal year, the success of its latest currency adjustment may depend less on numbers — and more on political will.
