Libya’s central bank has approved letters of credit for importers worth $2 billion, in an effort to curb “frightening” price increases, the bank said on Wednesday, as the declining value of the dinar drives up inflation.
The letters of credit letters enable importers to buy dollars at the official rate of 1.3 dinars to the dollar, a bargain since the dollar costs more than 6 dinars on the dominant black market.
A total of 2,722 of the letters has been processed since Jan. 1, the bank said in a statement. Applications for 1,187 more, worth another $1 billion, are currently being handled.
Use of the letters were temporarily halted late last year amid allegations some importers were using them to obtain cheap dollars and sell them on the black market.
“There is no justification for a frightening rise of basic goods which is burdening citizens,” the bank said, blaming increased demand ahead of the Muslim fasting month of Ramadan next month.
Libya has been struggling to sustain an extensive welfare state, which guarantees some of the world’s lowest petrol and bread prices and provides employment for most adults in a bloated public service.
The system was put in place under Muammar Gaddafi, who was toppled in 2011. It has been expanded to add to the payroll more of the armed groups that helped overthrow Gaddafi.
Oil production recovered somewhat last year, helping to slow a decline by the dinar, but it remains 1 million barrels a day less than the 1.6 million Libya had reached in 2011.
