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Libyan Dinar Slips on Black Market amid Central Bank Crisis

People cross a street at Martyrs Square in Tripoli, Libya, July 5, 2021. (Reuters)
People cross a street at Martyrs Square in Tripoli, Libya, July 5, 2021. (Reuters)
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Libyan Dinar Slips on Black Market amid Central Bank Crisis

People cross a street at Martyrs Square in Tripoli, Libya, July 5, 2021. (Reuters)
People cross a street at Martyrs Square in Tripoli, Libya, July 5, 2021. (Reuters)

Libya's dinar currency is losing value against the US dollar in the country's black market amid a crisis over control of the central bank that has slashed oil output and exports.

Two black market dealers in Tripoli gave prices of 7.95 dinars to the dollar on Monday compared to 7.36 a week earlier, a drop of about 8%. The official exchange rate is 4.7 dinars to the greenback.

The sliding dinar may indicate that the impact of the ongoing dispute over leadership of the Central Bank of Libya (CBL) is starting to hit the economy more widely, which may further destabilise the major oil producer, according to Reuters.

The dealers attributed the dinar's decline to a lack of dollars in the market as the crisis has stopped the CBL issuing letters of credit, a key tool of monetary policy and exchange and export transactions in Libya for years.

Its economy also relies heavily on oil revenue, and factions in eastern Libya have blockaded most exports as a tactic in the dispute over the CBL, leading to force majeure being declared on oil fields and cutting off the state's source of income.

The Government of National Unity, based in Tripoli in western Libya, has said it expects the CBL to resume issuing letters of credit this week.

The crisis began when Presidential Council chief Mohammed al-Menfi, based in Tripoli, last month announced he was replacing veteran central bank Governor Sadiq al-Kabir, prompting pushback from eastern factions.

Legislative bodies aligned with the two sides are conducting UN-backed consultations aimed at resolving the crisis but have not yet announced significant progress. While the crisis continues, the CBL's access to international dollar markets appears limited.

"The exchange price is volatile because no dollars are entering the country, and oil (exports), the only source of revenue in the country, have also stopped," said a black-market dealer. The dinar could drop further if the crisis drags on, he added.

“There should be a solution very quickly because we, the citizens, are the only victim of the central bank crisis,” said Hisham Mohamed, a 45-year-old father of five in Tripoli.

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US Economy Grew at Solid 3% Rate Last Quarter, Government Says in Final Estimate

FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
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US Economy Grew at Solid 3% Rate Last Quarter, Government Says in Final Estimate

FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)
FILE - The New York Stock Exchange, at rear, is shown on Sept. 24, 2024, in New York. (AP Photo/Peter Morgan, File)

The American economy expanded at a healthy 3% annual pace from April through June, boosted by strong consumer spending and business investment, the government said Thursday, leaving its previous estimate unchanged.
The Commerce Department reported that the nation's gross domestic product — the nation's total output of goods and services — picked up sharply in the second quarter from the tepid 1.6% annual rate in the first three months of the year, The Associated Press reported.
Consumer spending, the primary driver of the economy, grew last quarter at a 2.8% pace, down slightly from the 2.9% rate the government had previously estimated. Business investment was also solid: It increased at a vigorous 8.3% annual pace last quarter, led by a 9.8% rise in investment in equipment.
The final GDP estimate for the April-June quarter included figures showing that inflation continues to ease, to just above the Federal Reserve’s 2% target. The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5% annual rate last quarter, down from 3% in the first quarter of the year. Excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.8% pace, down from 3.7% from January through March.
The US economy, the world's biggest, displayed remarkable resilience in the face of the 11 interest rate hikes the Fed carried out in 2022 and 2023 to fight the worst bout of inflation in four decades. Since peaking at 9.1% in mid-2022, annual inflation as measured by the consumer price index has tumbled to 2.5%.
Despite the surge in borrowing rates, the economy kept growing and employers kept hiring. Still, the job market has shown signs of weakness in recent months. From June through August, America's employers added an average of just 116,000 jobs a month, the lowest three-month average since mid-2020, when the COVID pandemic had paralyzed the economy. The unemployment rate has ticked up from a half-century low 3.4% last year to 4.2%, still relatively low.
Last week, responding to the steady drop in inflation and growing evidence of a more sluggish job market, the Fed cut its benchmark interest rate by an unusually large half-point. The rate cut, the Fed’s first in more than four years, reflected its new focus on shoring up the job market now that inflation has largely been tamed.
Some other barometers of the economy still look healthy. Americans last month increased their spending at retailers, for example, suggesting that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and high borrowing rates. The nation’s industrial production rebounded. The pace of single-family-home construction rose sharply from the pace a year earlier.
And this month, consumer sentiment rose for a third straight month, according to preliminary figures from the University of Michigan. The brighter outlook was driven by “more favorable prices as perceived by consumers” for cars, appliances, furniture and other long-lasting goods.
A category within GDP that measures the economy’s underlying strength rose at a healthy 2.7% annual rate, though that was down from 2.9% in the first quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
Though the Fed now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent and other necessities. Former President Donald Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.
On Thursday, the Commerce Department also issued revisions to previous GDP estimates. From 2018 through 2023, growth was mostly higher — an average annual rate of 2.3%, up from a previously reported 2.1% — largely because of upward revisions to consumer spending. The revisions showed that GDP grew 2.9% last year, up from the 2.5% previously reported.
Thursday’s report was the government’s third and final estimate of GDP growth for the April-June quarter. It will release its initial estimate of July-September GDP growth on Oct. 30.