Since the start of the decade, the Libyan dinar has lost close to 80% of its official value against the U.S. dollar — in a country not under economic sanction, where oil output steadily rose, and where foreign exchange (FX) reserves remain among the highest per capita in North Africa.
That contradiction points to something structural.
A new policy report published by The Geopolitical Desk in partnership with analyst and investor Munder Shuhumi argues the culprit is an incentive-design failure: a system that routinely creates large, predictable spreads between administered prices and market-clearing prices, while enforcement capacity remains insufficient to prevent those spreads from being monetised.
Three structural drivers keep this arbitrage machine running: multiple exchange-related prices that each create a distinct arbitrage opportunity, fiscal dominance that injects excess liquidity and import demand, and energy subsidies that function as a macro leak — draining reserves and financing smuggling networks.
One country, multiple exchange rates
Today, Libya effectively operates with three different prices for the same dollar, thus creating opportunities for exploitation.
After the January 2026 devaluation, the official rate stands at 6.38 dinars per dollar. On the parallel market, that same dollar costs as much as 9.10 dinars.
That gap, which has consistently been in the range of 30–45% since 2024, is wide and reliable enough to function as a predatory business model.
With adequate access, one can buy dollars cheaply through official channels, sell them at parallel market prices, and pocket the difference without producing any value whatsoever.
On top of that spread sits a third price, hidden inside the banking system itself.
Libya’s banks are chronically short of physical notes. Between 2022 and 2024, deposits surged while currency in circulation grew far more slowly, causing the cash-to-deposit ratio to collapse from roughly 42% to around 20%.
When the CBL authorised large dinar printing programmes in late 2024 and 2025, the new money largely entered the banking system as electronic credits rather than physical cash, widening the gap further.
Anyone who has money in a bank account but needs cash is forced to sell their cheque to a broker at a discount — typically 15% to 20% below face value.
That discount is effectively a third exchange rate. It also encourages dollarisation: if holding dinars in deposits imposes a penalty, rational agents switch to holding dollars or physical cash, amplifying FX demand.
When one stacks all wedges together, the effective cost of obtaining usable dollars can diverge from the official rate by 40 to 60% — an extraordinary arbitrage margin by any international standards.
