Under cover of September's ceasefire, which happily seems to be holding, Libya's central bank board met in full for the first time in six years this week. Much has changed since it last met, not least huge increases in corruption and money-laundering, and the bank acted swiftly to try to address such realities.
A dual-exchange-rate system has been in place for the last two years, with one rate for 'public sector transactions' fixed at USD 1 / LYD 1.4, and another for 'personal and private commercial transactions' fixed at USD 1 / LYD 3.9. This set-up made it easy for those with access to foreign currency at the cheaper rate to then sell those dollars etc at the higher one, or even on the yet-more-profitable black market (USD 1 / LYD 7). So, the central bank has unified its two rates into a single devalued rate for all transactions, at USD 1 / LYD 4.48, which will go live on 3 January 2021. However, as the new rate will again be fixed against the US dollar it may soon become overvalued (if it isn't already), so the black market is likely to persist.
The move is also expected to create more inflation, although the last reported annualised change in the consumer-price index, from April 2020, was low at 1.3%. ECA's data on prices reflecting expatriate consumption backs up the low-inflation picture.
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