Libya: Economic performances are futile with levies on foreign exchange fees

A small matter came last week, a decision of the Presidential Council on the economic reforms in Libya, which included mainly the fees imposed by the Libyan state.

The Libyan state works in many ways to achieve a number of economic, developmental, financial and social objectives, including exchange rate fees, as a primary objective of reducing commodity prices, including the imposition of foreign exchange rates.

The corruption of the credits in the difference between the exchange rate and the foreign currency and the attempt of the Central Bank to compete with the exchange rate of parallel markets in Libya become the most extensive artery in the management of the Libyan national economy in the funds to the private sector.

The taxes and customs duties imposed by the Libyan state have not yet become sufficient means to achieve a range of economic and developmental goals in the country.

With oil money being reduced to the Libyan treasury, reforms in Libya should have taken another course of collection of financial resources.

Libya is largely losing to domestic products that compete with foreign products which have resulted in a planned economy that the Libyan economy was founded in the past and present.

Libya has not yet been able to achieve self-sufficiency, to expand its domestic production to foreign competition and develop Libya's foreign exports to developing African countries.

The Government of National Reconciliation, with the assistance of the Central Bank, in the field of economic reforms agreed upon by the two parties to work to create financial resources from fees on foreign currency that deals with the problem of the trade balance in Libya.

The economic reform imposed on the Libyan state fees on the sale of cash in the form of remittances and fixing fees is a work of coordination with the Libyan Central Bank in the Libyan capital, a parallel section of the Libyan bank in the east of the country.

A unilateral decision by one bank aligned between the East and the West, today Libya loses the Union of Libyan Institutions, which are clearly stumbling in the service of the Libyan national economy of positive developments and clear-cut out of the Libyan crisis lasted long.

Libya is struggling with an explosive mix of financial and economic crises, from price inflation and devaluation of currency that declines in the value of the Libyan dinar against the US dollar, the lack of confidence of Libyan citizens, especially traders in Libyan banks and the direction to the Libyan parallel markets.

Today, we are talking about the Libyan economy and the economic state institutions, not the security and stability of the Libyan state politically and security.

The National Reconciliation Government with the Central Bank of Libya will gradually increase the exchange rate as an alternative to interest rates on borrowing from Libyan banks.

The real danger to the Libyan economy is the manipulation of double standards between foreign exchange fees and the rate of the leader on loans available from Libyan banks to Libyan customers in an attempt to falsify the Libyan national economic.

The Central Bank is unique in its decisions with the National Reconciliation Government, which is a disgraceful act that does not have any legal indicators from the legislative point of view.

The letters of credit orders that supply any goods reach a search for customs duties will increase the prices of goods imported from abroad.

The local currency in Libya has become traded in the hidden economy outside the Libyan banks operating in the Libyan national economy, a procedure that excludes import and export relations.

These like business transactions will at the time disturb Libyan trade and expand the continuation of the hidden economy in the Libyan state.

The imposition of foreign exchange fees and the increase in the rate of fees in the future does not work on the economic recovery in Libya but also affects the small and medium business transactions that have moved in their commercial transactions to parallel markets in Libya.

The issue today is in an economic crisis between the private sector and the commercial banks operating in Libya in terms of the competitiveness of the Libyan dinar and the US dollar, which operate with high capacity and the associated costs when traders are charged the rate of foreign currency collection.

The impact of the crisis on businesses that is not homogeneous for those who are active in Libya directly with the Libyan state in almost everything of the basic goods and services on which the people rely on in their daily lives.

The absence of the clear vision of development, the slow Libyan economic performance, and the inappropriate economic policies will prolong the existence of administrative and financial corruption rampant in all joints of the Libyan state.

The deprivation of the Libyan country most important natural resources, which meant to be put toward working to transfer Libya from the planned economy to the free economy.

Libya is different from the countries of the world when the decline in global oil and gas prices happens, as happened since the middle of 2014 and until now, confused the accounts of the Libyan treasury to provide hard currency and access to commercial banks operating in the state of Libya.

Salaries of civil servants, retirees, pensioners and the expenses of the civil war of Libyan militias, displaced Libyans in and outside the country, martyrs and health expenses abroad are accumulated expenses in the country.

Working to cover the deficit in the public budget resulting from the low revenues of Libyan oil exports constitutes economic disaster; the Libyan state is working to replace the national income resources with fees on foreign exchange sales.

This is the risk in moving from a rationally planned economy to a free world economy in which the exchange rate in the foreign currency is based on international standards of sale and purchase.

Libyan governments and banks are committed to private Libyan companies to deal with the dollar at the request of suppliers to Libya, but the transfer of these relations between the private sector and the government sector risks the value of the Libyan dinar, which is now only a banknote worthless.

Those who decided to impose a foreign exchange fees would have to hedge against the risks of exchange with the forward transactions for Libyan parallel markets, which are working to provide facilities from the circulation of the Libyan currency in the markets for the purpose of communicating to the internal reforms in Libya.

By Professor Ramzi Halim Mavrakis

Businessman - Libyan political and economic writer and analyst

Resident in the United States of America