Libyans Ditch Dollars As Oil Recovery Gathers Pace

Rising oil prices have relieved financial pressure on Libya, allowing authorities to channel more dollars to importers

- Ghaith Shennib, Saleh Sarrar, Lin Noueihed & Salma El Wardany

Libya’s powerful black market traders are encountering an unfamiliar sight: people showing up with bundles of dollars for sale.

Rising oil prices have relieved financial pressure on Libya, allowing authorities to channel more dollars to importers since the start of the year. Meanwhile, the central bank has eased restrictions on currency transfers that had made the black market the primary supplier of hard currency, fueling record inflation and impoverishing wage-earners already struggling since the 2011 NATO-backed rebellion.

The sudden hard currency influx strengthened the dinar by 50 percent on the black market mid-January. By Jan. 22, the rate had stabilised around 6.25 per dollar after languishing between 9 and 10 for much of last year. The official rate is pegged at 1.34 per dollar.

The development could offer some respite to the fragile internationally-recognised government in Tripoli, which has faced public anger over the rapid deterioration in living standards and security.

“It’s all come together at the same time,” said Ziad Layas, a Tripoli-based textile importer. “This might be a pain for drivers and bill-payers worldwide but is a blessing for a country that relies on oil as its sole source of cash.”

Since the war that ousted Muammar Qaddafi, Libya has been carved up among dozens of militias, with rival administrations in the east and in Tripoli. In 2014, infighting crippled shipments of crude oil, Libya’s main source of income, devastating the import-dependent economy. Oil exports resumed in September 2016 and output last year reached its highest level in four years, but a collapse in global prices delayed economic recovery.

As dollar-earnings dwindled, the central bank stopped granting letters of credit to most importers. That forced them into the black market, where a weakened dinar drove inflation to a record 31 percent in the second quarter of last year.