A new book by Saddek Omar Elkaber and Michael G. Schaeffer is set to detail the Central Bank of Libya's crisis years. But the real test is in the numbers-currency value, money supply, and the cost of decisions that shaped daily life.
Libya's monetary policy is back in the spotlight. The Central Bank's choices during years of crisis are up for debate again. A new book, "The Central Bank of Libya: Managing Monetary Policy Under Crisis," co-authored by former Governor Saddek Omar Elkaber and Michael G. Schaeffer, promises a close look at how the bank handled political splits, fiscal chaos, and currency shocks. But the real story is in the numbers-the fate of the Libyan dinar and what it meant for people on the ground.
The main issue is the gap between what the Central Bank said it was doing and what actually happened. Bank leaders point to strong foreign reserves as a win. But the money supply kept growing, and the gap between the official and parallel exchange rates only got wider. In 2023, broad money jumped from LYD 110.3 billion to LYD 141.4 billion, a 28% rise. By March 2024, it hit LYD 150.4 billion. The current-account surplus for 2023 was just USD 1.9 billion. The overall balance of payments surplus was only USD 196.5 million, even though the trade surplus was nearly USD 13.9 billion. These numbers show the clash between more government spending and the Central Bank's struggle to meet demand for foreign currency at the official rate. The Central Bank of Libya reported that in September 2026, the official exchange rate was around 6.37-6.38 dinars per US dollar. The parallel market rate was much higher, at 9.56-9.66 dinars. That's a gap of more than 3 dinars, showing just how unstable the market has become Libya Review.
Currency policy and the cost of division
The political split in 2014 did more than divide Libya's government. It broke the banking system. The Benghazi branch was cut off from the Tripoli-based settlement system. This wasn't just a technical move. It was meant to keep eastern authorities from getting state funds. The fallout was quick. Commercial banks and depositors paid the price for a split clearing system. This raises a tough question: could there have been a way to protect public money without breaking up the banking sector? Regional observers and the UN Economic Commission for Africa say this split still makes it hard to get state resources and currency liquidity across Libya.
Trying to defend the official LYD 1.40 exchange rate while oil revenues fell and deficits grew didn't work. A parallel market sprang up. Now, getting dollars at the official rate became a privilege. Most people had to pay more. Those with official access made money, while everyone else saw the dinar lose value and prices go up. The Central Bank kept talking about its reserves, but the real cost hit the wider economy and ordinary Libyans. In September 2026, Central Bank Governor Najji Issa said the bank would inject about $3 billion to meet currency demand and settle over $400 million in card transaction reserves. The goal was to ease pressure on the foreign exchange market and bring some stability Central Bank of Libya.
Reserves, reforms and unanswered questions
Foreign reserves are a tool, not the end goal. The Central Bank tried to protect reserves by limiting access to foreign currency, even as public spending and the money supply kept rising. This pushed more people to the parallel market and weakened the dinar's buying power. In 2021, the bank unified the exchange rate, devaluing the dinar from LYD 1.44 to LYD 4.48 per US dollar. This briefly narrowed the gap between official and market rates. But the IMF said the effect on inflation was small, since many goods were already priced at parallel rates. The real question is whether the new rate could last or if it just papered over deeper problems. In September 2026, the Central Bank kept up its liquidity management, issuing its 30th series of Islamic deposit certificates for commercial banks. This move followed regional best practices, as reported by Tunis Afrique Presse (TAP) and other Maghreb financial authorities.
By late 2023, the contradiction was clear. Public spending kept rising, driving up demand for foreign currency and widening the gap between official and parallel rates. The Central Bank's answer-a 27% levy on foreign-exchange transactions in March 2024-was a stopgap, not a fix. The IMF called it a reaction to pressure on reserves and the exchange rate. But the deeper problem was unchecked spending in dinars, outpacing the economy's ability to supply foreign currency at the set rate. Regional monetary authorities, like the Bank of Algeria and Morocco's Ministry of Economy and Finance, have flagged similar risks in their own statements. This shows how North African financial stability is closely linked.
Libya isn't alone in facing these problems. As reported earlier, efforts to centralize and coordinate financial systems keep coming up in Libya's push to restore stability and trust in its institutions. The Central Bank's recent talks with international advisors and Arab banks in London, covered by Al Araby and regional news wires, point to a new push for compliance, risk management, and rebuilding correspondent banking ties. These are key steps if Libya wants to rejoin the wider MENA financial system.
Who owns the economic narrative?
The new book is a chance to document a decade of monetary policy under pressure. But it's not the final word. The Central Bank's leaders aren't the only ones responsible for the fallout from political splits, runaway spending, oil blockades, and broken institutions. Still, it's not right to let monetary policy off the hook just because politics are messy. What matters most for a central bank is not just the size of its reserves, but whether it can keep the currency stable, control money supply growth, and stop big gaps between official and market exchange rates. Libya's economic story will be told not just by policymakers or critics, but by the numbers that show the real costs and results of every choice.
