Libya: Selected Issues

IMF Staff Country Reports, July 11, 2024

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Libya: Selected Issues

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Bibliographic details

• Published: July 11, 2024
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9798400282195.002

Overview

• This Selected Issues paper identifies the sources and quantifies the exchange market pressures on the Libyan dinar.
• Highlights:
  • (1) the cumulative pressure on the exchange rate has been negative; and
  • (2) despite the alternating appreciation and depreciation pressures, foreign exchange reserves have remained relatively stable.
• The authorities’ toolkit is limited: they strive to maintain the stock of reserves at a high level and to keep the exchange rate peg intact, all without the use of fiscal policy or of conventional monetary policy instruments.

Findings

• Cumulative exchange market pressure on the Libyan dinar has been negative.
• Foreign exchange reserves have remained relatively stable despite alternating appreciation and depreciation pressures.
• While Libya experienced periods of both depreciation and appreciation pressures, overall it faced substantial depreciation pressure.
• Over the medium term, Libya’s policies were not in line with the three-pronged macroeconomic objective of:
  • maintaining high foreign reserves,
  • a pegged official exchange rate, and
  • a narrow gap between the parallel and the official exchange rates.

Policy recommendations

• Develop conventional monetary policy tools to expand the authorities’ toolkit beyond reserve management and maintaining the peg.
• Ensure fiscal policy is consistent with overall macroeconomic objectives to support exchange rate stability.
• Use additional monetary tools and fiscal policy to help:
  • contain the parallel market premium, and
  • avoid resorting to capital flow measures.

Topics

• Central banks
• Currency markets
• Depreciation
• Exchange rates
• Financial markets
• Financial regulation and supervision
• Foreign exchange
• International reserves
• National accounts

International Monetary Fund — Libya: Selected Issues (July 11, 2024).

Content in this bundle

• Libya: Selected Issues; IMF Country Report No. 24/207; May 30, 2024
  • Libya: Selected Issues; IMF Country Report No. 24/207; May 30, 2024 (Markdown version)
  • Libya: Selected Issues; IMF Country Report No. 24/207; May 30, 2024 (PDF)