Benghazi – Dr. Helmy Al-Qamati is the Head of the Economics Department at Benghazi University. He believes the Central Bank of Libya’s Board of Directors made a sensitive move. They decided to resume selling foreign currency through banks and exchange companies. This action aims to address increasing pressure in the foreign exchange market. It also seeks to narrow the widening gap between official and parallel exchange rates.
Al-Qamati presented an economic analysis report. He stated that this step directly attempts to rebalance the market. It aims to increase the official supply of foreign currency. He explained this “unconventional” monetary tool’s success. It depends on the bank’s ability to manage excess local dinar liquidity. If not contained, this could regenerate demand for the dollar. It would then negate the decision’s positive impact.
Al-Qamati’s analysis highlighted the pivotal role of exchange companies. He described their integration into the system as an “acknowledgment of an existing reality.” However, he simultaneously warned of risks. These companies could become intermediaries for speculation. This would happen unless strict controls are imposed. Instant electronic linking with the Central Bank is also crucial. These measures ensure price discipline.
The economic expert emphasized that true stability is not about targeting a specific price. Instead, it lies in “reducing the arbitrage gap.” This gap fuels speculators’ profits. He warned against depleting reserves without harmonious fiscal and monetary policies. This could lead to adverse outcomes. It could also result in a loss of confidence in monetary policy tools.
Al-Qamati concluded his report by urging that this mechanism be considered a “temporary tool.” It should operate within a clear timeframe. He recommended adopting a more flexible exchange rate system in the medium term. This would ensure the economy transitions from “circumstantial treatments” to genuine and sustainable monetary stability.