Libya’s central bank will charge fees on foreign currency transactions as the oil-rich nation attempts to bridge a wide gap between the official and black market rates that has created a liquidity crisis and hurt business activity.
The proposal is a key feature in a three-pronged plan that also includes tackling a subsidy program and a mechanism to help offset the impact of economic reform efforts on the population, the central bank said in a statement on its website. No other details about the plan were provided in the statement.
The effort comes as the North African nation with Africa’s largest proven crude reserves struggles to revive its economy amid a conflict between rival militias, parallel governments and an overall collapse in security. The dinar’s exchange rate on the black market is around 6.2 dinars to the U.S. dollar compared with the official rate of around 1.36 dinars to the dollar.
The central bank has already worked to reduce the foreign-exchange rate arbitrage by easing restrictions on foreign currency transfers that had primed the black market. At the same time, officials are looking into reports of companies smuggling hard currency out of the country.
Central bank Governor Sadiq Al-Kabir and other officials agreed at a U.S. organized meeting in Tunisia this month on an economic reform plan that includes devaluing the dinar and raising fuel prices, the Libya Herald reported on June 6.