Libya's Central Bank to Print 30 Billion Dinars to Alleviate Cash Shortage
In a significant move to address the ongoing liquidity crisis, the Libyan Central Bank has announced a partnership with British banknote printing company De La Rue to print 30 billion dinars (approximately $6.25 billion). This decision comes as the country grapples with a severe cash shortage that has persisted since the fall of Muammar Gaddafi's regime in 2011. The Central Bank aims to gradually resolve these liquidity issues starting January 2024, as outlined in a plan approved by its Board of Directors.
Despite Libya's substantial oil wealth, the economy remains heavily reliant on oil revenues, which totaled 67.8 billion dinars from January to October 2023. During this period, government employee salaries accounted for a staggering 48.6 billion dinars, highlighting the financial strain on the state and its citizens. The current exchange rate stands at 4.8 dinars to the dollar.
The Central Bank's governor, Naji Issa, met with De La Rue's CEO, Cliff Vacher, to discuss the implementation of the printing contract and the schedule for receiving the new banknotes. The bank has also indicated plans to withdraw older banknotes, although specific details have yet to be disclosed.
Shift Towards Electronic Transactions Amid Cash Scarcity
The liquidity crisis has led to a notable shift in consumer behavior, with many Libyans increasingly relying on bank cards for transactions. The lack of confidence in the financial system has resulted in cash being hoarded rather than re-deposited in banks. Public sector employees, who represent a significant portion of the workforce, often experience delays in salary payments, exacerbating the financial difficulties faced by many.
Currently, the maximum withdrawal limit from banks is set at 1,000 dinars (approximately $205), typically available only once a month. A bank employee from Misrata noted that while cash usage remains prevalent, younger generations are more inclined to adopt electronic payment methods. Economic expert Khaled Al-Dalfaq emphasized the need for improved accessibility to electronic services to facilitate daily transactions, particularly during liquidity crises.
The political instability in Libya has also contributed to the complexities of its banking system, including the circulation of multiple versions of the 50-dinar banknote. The Central Bank had to announce the withdrawal of these notes due to rampant counterfeiting and the existence of various notes printed by different authorities. In a bid to tackle the liquidity issue, the Central Bank injected 15 billion dinars into the banking system in late October and has encouraged banks to facilitate the issuance of cards while reducing transaction fees to promote electronic payments.
