Libya’s Foreign Currency Crunch: Central Bank Flags $3B Monthly Deficit
At a November 2025 banking conference in Tripoli, Central Bank Governor Naji Issa issued a stark warning about Libya’s fiscal position. “The country needs US$3 billion,” he said. “However, monthly revenues total only US$1.5 billion. How can we address this shortfall, particularly amid growing demands from the private sector, merchants and other institutions?”. The governor’s blunt words underscore a growing financial squeeze. Whilst official accounts show a budget surplus in local currency, Libya faces an acute shortage of foreign currency. Much of the issue at hand traces back to the bank’s own split management, a legacy of the country’s political divisions.
Split Authority and Stalled Unification
For more than a decade Libya’s central bank was effectively split into rival branches. A parallel eastern branch emerged after the 2014 civil war, when the country divided between competing administrations. In August 2023, Libya’s authorities announced that the CBL had been reinstated as a unified sovereign institution, uniting the Tripoli and Benghazi branches. But the unity was short-lived. In mid-2024 the UN–led Presidential Council moved to replace veteran Governor Sadiq al-Kabir, prompting the eastern authorities (under Speaker Aguila Saleh) to halt most oil production in protest.
UN-brokered talks eventually broke the deadlock. In late September 2024, delegations from both legislative bodies agreed to nominate the CBL’s banking director, Naji Issa, as interim governor (with Mari Barrasi as deputy). On Sept. 30, the eastern-based House of Representatives formally approved Issa’s appointment. The move was hailed as a way to end the standoff over oil revenues and resume exports. In practice, however, Issa now heads a central bank still constrained by dual authority: he acknowledges that he is “working with two governments,” since ministries of finance, economy and others remain divided. The bank must juggle conflicting demands from the Tripoli-based unity government and the eastern-aligned parliament, making coherent policy difficult to implement.
A Surplus in Dinars, a Shortfall in Dollars
Libya’s public finances showed a surplus for the first nine months of 2025, according to the Central Bank of Libya (CBL). From January to September, the government earned 94.6 billion Libyan dinars and spent 86.2 billion, creating a surplus of about 8.4 billion dinars (roughly $1.5–2.0 billion). Most of the income came from oil sales (79.4 billion dinars) and royalties (13.4 billion dinars). However, this surplus hides a critical issue: the country’s foreign-currency deficit. Despite earning $17.7 billion in oil and royalty revenues, Libya spent $23.7 billion in hard currency on imports, subsidies, and other payments, leaving a $6.0 billion shortfall. In simple terms, Libya earned about $1.5–1.9 billion per month from oil, but needed about $2.6 billion each month in foreign currency to cover its expenses.
As per the governor’s statement, roughly $3 billion per month is needed to cover government obligations, even as actual oil receipts hover near $1.5 billion. The rest of the gap must be filled by drawing on reserves or outside borrowing – and so far it has not been. Prime Minister Dbeibah echoed these concerns: he noted that in just January–February 2025, Libya earned about $3.6 billion in foreign currency but spent $6.1 billion, with a resulting trade deficit of roughly $2.5 billion. His letter to the CBL urged full transparency on these flows, arguing that focusing only on cutting domestic spending “is a small part of the problem, not the main one”.
The result is a persistent currency crunch. With oil below expectations, the central bank has limited dollars to sell. Citizens feel this in rising prices and a dual exchange rate. The CBL is funneling scarce dollars to essential imports, but at the cost of widening the gap between the official and parallel markets. Issa has pointed to a “structural” imbalance caused by the government’s near-total dependence on oil revenues and the fragmentation of institutions.
To close the gap, Issa and analysts argue Libya is in desperate need of fundamental reforms. That will require overcoming the split institutions. There are no quick fixes without a unified vision: “Everyone blames the banking sector and the Central Bank,” Issa observed, “but there are no magic solutions without a unified vision and functioning state institutions”.
Issa has pushed some initiatives – for example, plans to form a banking holding company and improve credit channels – but admits these cannot succeed under present conditions. He stressed that without a coherent state budget and unified economic policy, the CBL cannot operate independently in all areas, even in monetary policy. In practical terms, this means the bank has only partial control over money supply and exchange rates, since it must cater to the competing demands of different power centers.
A year after finally establishing a unified board of directors, Issa himself lamented that little has changed on the ground. An analysis of the November conference noted that none of the promised reforms – strengthening the dinar, ending the cash crisis, boosting private credit – have been fully resolved, even as ordinary Libyans face high inflation and declining purchasing power. Meanwhile, Issa warned that without higher oil prices or budget cuts, the economy will soon be unable to meet basic obligations. He asked rhetorically: if oil falls to $52 per barrel, “what will Libya’s economy look like in the next three years? Will the state continue employing more than 2.5 million people at the expense of development funding?”.
Ultimately, Libya’s central bank remains split in purpose even if it is nominally unified. The country’s political divisions – two governments, two budgets – have prevented a decisive strategy for tackling the dollar shortfall. For the citizens of Libya, the hope is that the CBL’s dire warnings will spur concerted action. Until then, the question of the nation will deal with the $3 billion monthly gap hangs unresolved, a symptom of deeper institutional frays within the state.
