Food, medicine, clothing, and various industrial materials are imported by Libyan traders to meet the needs of the local market. Approximately 85% of goods supplied to the market are imported. However, all goods are supplied to Libya using non-local currencies due to the Libyan Bank’s inability to meet the foreign currency needs of all traders. Consequently, a parallel market for speculation in foreign currency has emerged, facilitating money transfers between Libyan cities and funds from outside Libya into the country. This parallel market operates solely based on demand and supply rules, resulting in the dollar price being 400 or 500 dirhams higher than the rate set by the Central Bank of Libya. During times of political crisis, this value may increase further.
Traders prefer to conduct transactions through the parallel market due to the faster completion of transactions and the absence of procedural complexities compared to banks. However, engaging in this market exposes traders to potential losses. Muhammad Atturki, a currency trader, expressed his concerns, stating, “Rising or falling currency results in sometimes significant losses, as we are being robbed because our trade depends on money transfers in large numbers and weak security in Libya.”
Speculation in the foreign exchange rate has led to a significant difference between the official rate and the rate in the parallel market. Previously, one dollar was equivalent to 9 Libyan dinars in the parallel market, while its official rate was only 1.30 dinars. Some specialists attribute the decrease in the foreign currency rate and its position in the parallel market to government decisions. Economist Abubakar Attor called for speculative companies and shops to be linked to the Central Bank of Libya to ensure better cash management in the country and to control the rising import of goods from abroad.
Abubakar Attor further commented on the nature of the parallel market, stating, “It is considered a free market and controlled by a group of speculators only. There are no specific regulations, and it operates as a license to sell and buy foreign currency without controls. The currency market worldwide experiences fluctuations of around 50 dirhams, but when the dollar price rises dramatically, the market closes until its price adjusts.”
Despite the perceptions of economists and the grievances expressed by currency traders, foreign currency seekers find that the parallel market meets their needs, even if it means paying an extra amount.