Foreign-exchange gap threatens the exchange rate
Libya – The head of the economics department at the University of Benghazi, Helmi Al-Qamati, warned that a $4.9 billion foreign-exchange gap could turn into a further fall in the dinar’s value, stressing that the exchange-rate crisis reflects a deeper financial and structural imbalance than the $4.9 billion shortfall alone.
Warning of dinar devaluation and call to control spending
In special remarks to Erem News Business, Al-Qamati stressed that the problem is not the dollar alone but the structure of the economy: if the economy produces roughly one commodity to generate most of its external revenue while importing a large share of its needs, any mismatch between dollar inflows and uses will sooner or later show up in the exchange market.
Responding to whether devaluing the dinar could be the solution, Helmi Al-Qamati added: “Devaluing the dinar may look like a simple way to reduce demand for the dollar, but in an economy that depends on importing food, medicine, fuel and intermediate and capital goods, a dinar devaluation may simply mean higher import costs and prices.”
Protecting reserves and steering imports
Al-Qamati said dealing with the issue requires a simultaneous package: protecting reserves of about $96 billion; steering imports toward priorities without banning them; and controlling public spending without touching salaries of about 46.9 billion dinars, subsidies of about 11.8 billion dinars and operating expenditure of about 9 billion dinars, while development spending remains below 1 billion dinars.
He said that under a continuing shortfall, Libya’s economy faces growing pressure on the dinar from the mismatch between its capacity to generate foreign exchange and demand for it, describing the $4.9 billion gap as an early warning signal.
