By CultureBanx Team
Foreign currency transaction fees now 183% at Libyan banks
Libya’s dinar exchange rate on the black market is 6.2 to the U.S. dollar
Libya is a country in disarray where the central bank struggles to impose its will on black market money. The government has taken a stand and is changing that by implementing a foreign currency transaction fee of 183% at its banks.
Why This Matters: Libya has been in financial turmoil since the fall of Muammar Gaddafi in a NATO-backed uprising in 2011. This swift move by the country’s Government of National Accord to fend off its growing liquidity crisis effectively devalues the Libyan dinar.
Reuters reported the dinar’s exchange rate on the black market is about 6.2 to the U.S. dollar compared with the official rate of about 1.4 per dollar. There are some things that won’t be taxed as part of this process like family allowances, imported fuel and other subsidized goods.
The growing liquidity catastrophe has altered Libya’s economy that heavily relies on oil. Corruption has been on the rise as armed groups with access to dollars at the official rate, make outsized profits through various import scams. This new fee could help corale these problems because commercial banks that grant foreign currencies at the official rate on orders from the central bank, are in practice controlled by armed groups which stand to lose if they pay this significantly higher fee.
Situational Awareness: It’s unclear if this will have the impact Libya’s government is hoping for, especially if you look at other countries like India that have gone the route of demonetization and failed. For Libya this new fee is supposed to be paid on commercial transactions, however it’s yet to be determined exactly how it will be collected.
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