Recent foreign exchange transactions indicate that the Central Bank of Libya purchased 30 tonnes of gold last year, boosting the country’s reserves to their highest level since the fall of dictator Muammar Gaddafi in 2011.
It is now widely known that Libya’s gold reserves were looted around the time of Gaddafi’s ouster. Some estimates suggest that 20% of the stock was stolen.
Libya recently implemented foreign exchange sales fees that are expected to further depreciate the value of the Libyan dinar by over 27%.
Had it not been for the introduction of these new fees, Libyans would not have known that their central bank had acquired 30 tonnes of gold valued at nearly $2bn back in June 2023, marking its first such purchase in a quarter of a century.
When news reached them, Libyans were surprised. The country now boasts its highest-ever gold reserves at 146.65 tonnes. Its previous highest was 143.82 tonnes in 2000.
Dbeibeh and Al-Kabir
Various quarters in Libya, including the Government of National Unity, the High Council of State, parliamentarians, academics, and experts, have criticised the recently approved foreign exchange sales fees.
Prime Minister Abdul Hamid Dbeibeh defends the imposition of these fees by citing positive economic and financial indicators, such as Libya’s return to gold storage.
The heaviest criticism came from Central Bank Governor Al-Sadiq Al-Kabir, who was anxious about significant government spending expansion.
Last month, Al-Kabir attributed the currency’s decline to informal spending by state institutions and advocated for a unified national budget and the formation of a coherent government.
As Libya's finance controller, Al-Kabir refused to finance Dbeibeh's proposed budget and has excluded wage disbursements from consideration.
With his decision to restrict funding sources, an open conflict has broken out between the two men. In most other countries, the prime minister would have more heft in this tussle.
In Libya, however, the balance of power and the internal dynamics suggest that Dbeibeh could end up being the one removed from office.
The prime minister appears to lack the ability to effectively challenge the Central Bank's governor, who has been in power since 2011 and has significant control over the country's finances.
Growing pains
Enhancing its gold reserves is a crucial safety net for Libyan state coffers that could hedge against inflation, economic and financial fluctuations, and geopolitical tensions.
It could also diversify investment portfolios while stabilising currency value. However, in Libya, the nation's gold reserves are seen through both an economic and political lens.
The International Monetary Fund (IMF) thinks Libya will have the Arab world's highest growth rate in 2024, at 7.5%. Foreign exchange reserves are estimated at $82bn.
Yet it still grapples with transparency and legitimacy issues, partly because the country has had two governments since 2014—one in eastern Libya, in Benghazi, and the other in western Libya, in Tripoli.
Rampant corruption, institutional fragility, and external ambitions—namely, competing interests for control of Libya's oil wealth—exacerbate the situation.
The Government of National Unity operates in the east, while the Government of National Stability is in the west. Ironically, unity and stability remain elusive.
Libya has a troubling history of mismanagement and looting. Many suspect Gaddafi or his closest aides took the gold in 2011. To this day, the gold has never been found or traced despite numerous internal and external investigations.
