Country Report Libya
- ID: 2101513
- May 2016
- Region: Libya
- 25 Pages
- The Economist Intelligence Unit
The black-market dollar rate fell to slightly below LD4:US$1 in mid-May.
The reprieve comes after the black-market rate had weakened to a near-record LD4:US$1 in late April. According to Libya Herald-a local newspaper-the rate quoted by traders in mid-May was LD3.70:US$1, compared with an official rate of LD1.37:US$1. The narrower gap between the official and unofficial rate partly reflects efforts by the Central Bank of Libya (CBL) to ease the dollar shortage. At end-April the CBL approved letters of credit worth over US$280m, most of which were allocated for food and industrial raw materials imports. However, the relief will be temporary, as the UN-backed Government of National Accord (GNA) in Libya is struggling to restore oil output, with knock-on effects on dollar earnings.
The ongoing inter-regional conflict, and the consequent collapse of oil revenue, has led to a severe shortage of hard currency, forcing businesses to rely increasingly on the black market to source their dollars. As a result, retail prices of basic commodities have surged, reflecting the black-market-rather than the official-rate. This development also suggests that officially published consumer price inflation figures by the CBL are largely out of sync with the actual price level. Despite the raging civil war, the CBL reported annual average inflation at just 2.4% in 2014. Meanwhile, year-on-year inflation in the first nine months of 2015 averaged 8.4%, a relatively small increase given the severe supply bottlenecks and the soaring dollar on the black market.