The dollar’s rate on Libya’s parallel market has approached 10 dinars, compared with an official rate of 6 dinars and 40 dirhams, putting the gap between the two rates at more than 3 dinars, according to Ahmed Khalifa. The disparity is driving up the cost of imported goods and adding to households’ financial pressures amid weak wages.
Khalifa said the Central Bank of Libya was seeking to narrow the gap and curb the parallel market’s dominance of dollar trading by making foreign currency available through banks under what is known as the “personal purposes allowance.” He added that traders who buy dollars on the parallel market pass the exchange-rate difference on to the cost of goods borne by consumers.
Food costs exceed the minimum wage
A study by the Food and Agriculture Organization of the United Nations (FAO), conducted in cooperation with Libya’s National Council for Economic and Social Development, found that a Libyan household needs about 1500 dinars to cover the cost of a healthy food basket, while the minimum wage is 1000 dinars. The basket therefore exceeds the entire income of some households by about 500 dinars, while food accounts for about 40% of household income.
Wages and subsidies put pressure on public spending
The latest data from the Central Bank of Libya showed that spending under Chapter One, allocated to wages, amounted to about 5.8 billion dinars, equivalent to about 902 million dollars, during January and February. The figure does not include February wages, which were recorded after the end of the month. Spending on subsidies reached about 715 million dinars, equivalent to about 111 million dollars.
According to the data cited in the report, the fuel bill rose from about 500 million dollars in February to 1.4 billion dollars in June, adding to demand for foreign currency in an economy that relies primarily on oil revenues to supply dollars.
Oil shutdowns and threat of force majeure
The exchange-rate and cost-of-living pressures coincided with a crisis in the oil sector. Prime Minister of the Government of National Unity Abdul Hamid Dbeibah decided to bring the salaries of members of the Petroleum Facilities Guard in line with those of the army after protesters closed the gates of the Zawiya oil complex and the entrances to companies operating inside it, west of the capital, Tripoli.
The National Oil Corporation signaled that it could declare force majeure if Valve No. 7 in the Hamada area, on the crude-oil pipeline linking the Sharara field to the Zawiya port, was not reopened, according to Khalifa. Disruptions in the oil sector, the state’s main source of income, are increasing pressure on foreign-currency resources as the dollar rises on the parallel market and wages lose purchasing power.
