Libya’s economy is facing one of its most complex monetary challenges in years, as citizens continue to struggle with persistent cash shortages, crowded banks, and a widening gap between the official exchange rate and prices in the parallel market.
At the same time, a growing volume of money circulating outside the banking system is undermining confidence in monetary policy and weakening financial stability.
In an attempt to ease liquidity pressures, the Central Bank of Libya has turned to exceptional measures, including the decision to print new currency. While intended as a temporary solution, the move has raised concerns about its potential impact on inflation and exchange rate stability, particularly amid political fragmentation and unchecked public spending that weaken the effectiveness of monetary policy.
Economic analyst Ayoub Mohamed Al-Farisi, a member of the Central Bank’s Monetary Policy Committee, has stressed that the decision to print 60 billion Libyan dinars was an emergency response rather than a long-term fix. He warned that injecting large sums of cash too quickly could fuel inflation, boost demand for foreign currency, and further pressure the parallel market.
According to Al-Farisi, the core issue is not a shortage of money but the collapse of confidence between citizens and financial institutions. As a result, many Libyans prefer to hold their savings in cash rather than deposit them in banks, leading to a massive accumulation of liquidity outside the banking system. Once withdrawn, this cash rarely returns, except for limited purposes such as purchasing foreign currency or opening letters of credit.
This growing off-system liquidity has had a dual effect, deepening cash shortages within banks while simultaneously increasing overall money supply, pushing prices higher and eroding purchasing power. Al-Farisi revealed that the full amount has not yet been printed, noting that an initial tranche of approximately 12 billion dinars has arrived and will be injected gradually over three months to avoid sudden shocks, particularly ahead of the Ramadan period.
The currency printing plan also aims to withdraw older banknotes whose circulation exceeded official records, a factor that posed serious risks to monetary stability. Analysts agree that without restoring confidence, tightening fiscal discipline, and unifying financial governance, printing money alone will not resolve Libya’s liquidity crisis.
