Libya Implements Major Dinar Devaluation Amid Economic and Political Pressures

CAIRO,   — Libya’s Central Bank has announced a significant devaluation of the national currency, setting the official exchange rate at 5.5677 dinars per U.S. dollar, marking a 13.3% decline. The decision, which takes immediate effect, represents the first official adjustment since the dinar was pegged at 4.48 to the dollar in 2020.

The move comes amid continued economic uncertainty and a widening gap with the parallel market, where the dinar currently trades at 7.20 to the dollar.

The central bank’s announcement follows last year's monetary instability, which was exacerbated by a political standoff over control of the bank. The dispute severely impacted oil production and exports — Libya’s primary revenue source. The crisis was ultimately resolved in September through a U.N.-mediated agreement between rival eastern and western legislative bodies, enabling the appointment of a new central bank governor.

Further monetary adjustments have followed. In November, the eastern-based parliament speaker lowered the tax on foreign currency purchases from 20% to 15%, affecting the rates applied by commercial banks when providing foreign exchange.

Libya, still grappling with the legacy of its 2011 NATO-backed uprising and subsequent political division since 2014, continues to operate under dual administrations. This fragmentation has complicated fiscal management and transparency. In 2024, the combined government expenditures amounted to 224 billion dinars (approximately $46 billion), including 42 billion dinars allocated to crude-for-fuel swap agreements, according to the Central Bank’s Sunday statement.

Public debt has reached 270 billion dinars and is projected to exceed 330 billion dinars by the end of 2025 in the absence of a unified national budget.

In a December address, Stephanie Koury, Deputy Head of the United Nations Support Mission in Libya, underscored the urgency of establishing a national financial framework. “Libya’s leaders must urgently agree on a spending framework for 2025, with clearly defined limits and robust oversight mechanisms,” she said.

As Libya continues to navigate its complex political landscape, the latest currency devaluation underscores the need for cohesive fiscal policy and lasting institutional reform to stabilize its economy.