On 12 August 2026, the Central Bank of Libya’s published average rate for the US dollar was 6.3665 dinars. The number is precise. The policy supporting it is not yet equally clear.

Libya has already taken two major exchange-rate decisions in less than a year. The Central Bank reduced the dinar’s value by 13.3 per cent from 6 April 2025, setting it at 0.1349 Special Drawing Rights. It then reduced the value by a further 14.7 per cent from 18 January 2026, to 0.1150 SDR. Applied sequentially, those adjustments amount to a cumulative loss of roughly 26 per cent against the SDR.

A devaluation can reduce the distance between an official rate and the rate available outside the banking system. It can also raise dinar revenue when the state converts oil dollars. But it cannot, by itself, remove the forces that produce repeated pressure: public spending disconnected from a unified budget, a large salary bill, subsidy commitments, import dependence and uneven access to foreign currency.

The exchange rate begins with the budget

The Central Bank’s 2025 statement records total public spending of 136.8 billion dinars. Salaries accounted for 73.3 billion and subsidies for 34.5 billion. Together, those two categories absorbed 107.8 billion dinars — almost 79 per cent of recorded expenditure — before development, administration and other obligations were considered.

This structure matters because the dinar is not defended only at the foreign-exchange window. It is defended, or weakened, every time the state creates dinar demand without a corresponding increase in productive capacity or reliable non-oil revenue. When households, firms and public entities receive more dinars while the supply of tradable goods remains constrained, the demand ultimately returns to the same limited pool of foreign currency.

That is why a credible exchange-rate policy must begin with a credible fiscal contract. The government, legislature and Central Bank need a shared ceiling for public spending, a transparent financing plan and a published method for reconciling oil receipts, sovereign income, fees and foreign-exchange sales. Without that architecture, a new rate can be announced, but its defence remains improvised.

79%

of recorded 2025 expenditure went to salaries and subsidies. That spending structure is part of the exchange-rate story.

One market requires one intelligible rule

The persistence of a parallel market is often described as a policing problem. It is more accurately a policy signal. It shows that the official system is not meeting all demand at the announced price, speed and level of certainty. Administrative controls may ration access, but they also create a premium for whoever can obtain foreign currency through formal channels.

The objective should not be to promise a permanently cheap dollar. It should be to make the official mechanism predictable enough that businesses and households do not need to price uncertainty into every transaction. That means publishing allocation rules, decision times, rejection reasons and aggregate demand by channel. It also means measuring the full cost of exchange-rate fees and showing where that revenue enters the public accounts.

A managed rate can work when the public knows what reserves support it, what spending path is consistent with it and what conditions would trigger an adjustment. Silence on those questions makes every official rate look temporary, even when the reserve position is substantial.

Defence through disclosure

Libya’s policy debate often swings between two absolutes: hold the dinar at almost any cost, or devalue until the gap disappears. Neither is a strategy. A defendable rate is the outcome of coordinated fiscal, monetary and trade policy. It is also an information policy.

The Central Bank can strengthen credibility by publishing a monthly foreign-currency balance that connects oil and other inflows to letters of credit, personal-purpose allocations, government uses and reserve changes. Fiscal authorities should publish commitment-level spending data against one national framework. Parliament should evaluate the exchange rate together with the expenditure that creates demand for dollars, rather than treating them as separate files.

The dinar’s value is ultimately a public promise: a promise that institutions will not create obligations they cannot finance, that access to foreign currency will follow known rules and that corrections will be explained before they become crises. The exact rate matters. The contract behind it matters more.