2024-04-15 17:06:14
The researcher in the Libyan affairs, A. Muhammad Darmish considered the negative effects of reducing the exchange rate of the Libyan dinar on the national economy, especially on industrial imports, commodity prices, and the purchasing power of the Libyan citizen.
Darmish said in a special statement to “Ain Libya” that the industry in Libya depends on importing most of the intermediate goods, machines and equipment, and the reduction in the exchange rate of the Libyan dinar against other currencies leads to an increase in the prices of these imported goods, and an increase in the cost of local industry products and thus an increase in the prices of goods. The global demand for it will decrease and its competitiveness will weaken.
Darmish added that reducing the real exchange rate will lead to an increase in the number of units of the local currency compared to the unit of foreign currency, and since the industry in Libya depends on importing most of the intermediate goods from abroad as well as machinery and machines, this will lead to an increase in the cost of importing these industrial needs. It ultimately leads to an increase in the cost of Libyan industrial products and thus an increase in prices.
As for industrial exports that depend on local intermediate goods, such as “cement,” the devaluation of the exchange rate on this type of industry will be negative, but not to a large extent, because the intermediate goods used in these industries are produced locally.
As for industrial exports, which depend on imported intermediate goods, the impact of lowering the exchange rate on them will be significant, and the cost of importing them will increase, which means an increase in the cost of final industries, and a weakening of their ability to compete, according to Darmesh.
Darmish pointed to the significant decline in the average per capita income of Libya, resulting from the policy of devaluing the dinar against other currencies, as the average per capita income fell from 500 dollars a month to 125 dollars, considering that this unilateral measure had a significant impact on the public life of the Libyan citizen, causing Increasing rates of poverty and deprivation of basic rights.
According to Darmish, the Libyan state is repeating the same mistakes of the past, when it imposed a tax on imports and on the purchase of foreign currency, pointing to what financial institutions did at the end of the year 2020 AD when they unified the exchange rate by decision of the Board of Directors of the Central Bank at (4.48) dinars to one dollar. Which increased the severity of distortions and inflation in the prices of goods and services, increased numbers and inflation of general budget items, the exit of small and medium business units from work, and workers losing their jobs.
Darmish pointed out that the Central Bank Governor’s intention to impose an additional fee on the sale of foreign currency will increase the suffering of the citizen and exacerbate the distortions, as a unilateral measure that will lead to further inflation of the general budget numbers and increase the demand for government jobs, which will burden the public treasury.
Darmish stressed that the Libyan dinar will not return to its former strength unless there is a political will that has a vision and a strategy with specific goals, achievable and adaptable to changes, that creates harmony between economic policies (financial, monetary and commercial), considering that this is unattainable in Libya today.
Darmesh presented a set of proposals to regulate the financial situation, reduce inflation, and curb the decline in the value of the national currency, including:
It regulates the opening of credits in order to achieve justice in their distribution. The customer, beneficiary, or applicant for credit (manufacturer, agent, supplier, wholesaler, companies, intermediary, etc.) at the end of each June submits his import budget to the nearest economic services control, at the place of residence. Or the municipality in which it is located, showing the total needs for the coming year, and showing (type of goods, purchase price from the supplier, resale price, selling price to the citizen) distributed over the days, weeks, and months of the year, and divided into four quarters of the year.
Darmish explained that in this way we ensure justice in the distribution and control of credits, the flow of goods and services throughout the year, the preservation of safety stocks, the maintenance of prices of goods and services, and quality control.
Darmish suggested that the Foreign Trade Department and the Internal Trade Department directly supervise this work, and have a database and information that is renewed every three months by following up on the work of all segments to be the nucleus of the import budget database for the Libyan state.
In his proposals, Darmesh called for obligating the client when opening credits to pay a certain percentage in cash, in order to benefit from it in creating a sustainable liquidity turnover, developing the banking sector and keeping pace with modernity, working to qualify and train human cadres, allowing foreign banks with a good reputation to operate in the Libyan environment, and encouraging Customers to open accounts in hard currency, and encourage depositors whoever deposits the largest amount with the incentive of double will be granted credits and bank facilities.
Darmish also called for withdrawing the category of fifty, twenty, ten, five, and below from the seventh issue and below, following up on events, and dealing with emerging variables in thoughtful ways and adapting to them in coordination with the relevant authorities, in order to continue harmony between the three economic policies (monetary, financial, and trade), and to preserve On exchange rate rates, liquidity turnover, financial sustainability, and diversification of sources of national income.
Last updated: April 15, 2024 – 14:52
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2024-04-15 17:06:14