Economist warns of eroding purchasing power
LIBYA – Economic analyst Ahmed Al-Khamisi has warned against any further devaluation of the Libyan dinar, arguing that the currency needs not so much a rescue as an end to the policies that weaken it.
Devaluation is no cure for crises
In exclusive comments to the Laam network, Al-Khamisi said that cutting the currency’s value whenever monetary policymakers run short of options is no magic cure for the economy’s crises, and questioned whether citizens already hit by rising prices can bear the consequences of decisions for which they were not responsible.
Swelling spending and a drain on foreign currency
He criticised the argument that devaluing the dinar is necessary to protect the economy at a time of swelling public spending, widening fiscal gaps and dwindling foreign currency resources, while households are made to shoulder the cost of reform out of their livelihoods, medicines and daily needs, as he put it.
Real wages lose value
He said that, in his analysis, devaluation reduces purchasing power, raises import costs and passes the burden on to prices, while most wages stay fixed in nominal terms and lose their real value.
