Benghazi caught between closing the parallel market and withdrawing liquidity: Will these measures lower the dollar or deepen the crisis?

December 21, 2025
libyawire
Society
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Benghazi, December 18, 2025 – The city of Benghazi is witnessing intense economic debate following measures aimed at closing the parallel currency market and withdrawing large quantities of Libyan dinars from traders’ coffers to deposit them in banks. This is a declared effort to control the exchange rate and alleviate the liquidity crisis. Between supporters who see it as a decisive step to curb speculation and skeptics who warn of its repercussions, a fundamental question arises: Do these measures represent an effective solution or a temporary fix that could turn into an economic burden?

– Limited Immediate Impact

According to market observers, these measures may cause a temporary decline in the dollar’s price due to a contraction in cash trading outside official channels and a reduction in speculative activity in the short term. However, experts say this impact remains fragile if not supported by parallel reforms that ensure an organized flow of cash and the availability of dollars through legitimate and transparent channels.

– Fears of Deepening the Crisis

Conversely, economists warn that drying up liquidity without practical alternatives could worsen the cash crisis and put pressure on daily commercial activity. This could push individuals and traders towards dollarization and seeking refuge in gold as a safe haven, which may drive up the dollar’s price again in the unofficial market. Furthermore, forcibly closing the parallel market without addressing its root causes could push it to operate in secrecy rather than eliminating it.

– Is Re-injecting the Withdrawn Currency the Solution?

Debate also arises regarding holding the Governor of the Central Bank of Libya responsible for the crisis and demanding the re-injection of the withdrawn currency into circulation. Specialists believe that randomly re-injecting cash may temporarily solve the “cash” crisis, but it does not address exchange rate imbalances, especially if the withdrawal was linked to irregular issuances or regulatory necessities aimed at restoring confidence in the monetary system.

– Proposed Alternatives

Analysts agree that the most effective solution lies in a comprehensive package that includes: regulating the exchange market through transparent official channels to meet real demand, providing sufficient and regular liquidity to traders and citizens without sudden drying up, accelerating the shift to electronic payments with reliable infrastructure, and controlling public spending while coordinating fiscal and monetary policies.

In conclusion, measures to close the parallel market and withdraw liquidity may provide temporary calm, but alone they are insufficient to ensure lasting stability. Without comprehensive reforms that address the root causes of the imbalance, fears remain of a return to turmoil and a rising dollar, further burdening citizens and increasing living pressures in the city of Benghazi.

Benghazi

Benghazi is a major city in eastern Libya, historically significant as a center of trade and culture since its founding as the Greek colony of Euesperides in the 6th century BC. It played a pivotal role in Libya’s modern history, serving as a co-capital and as a focal point during the 2011 revolution.

Libyan dinar

The Libyan dinar is the official currency of Libya, introduced in 1971 to replace the Libyan pound. It was established following the country’s independence and the rise of the Libyan Arab Republic, centralizing the monetary system.

dollar

The dollar is the official currency of the United States, established by the Coinage Act of 1792. Its history is rooted in the Spanish “pieces of eight” used in the Americas during colonial times, and it has since evolved into the world’s primary reserve currency.

gold

Gold is a chemical element (Au) and precious metal that has been highly valued across cultures for millennia, used historically for coinage, jewelry, and as a store of wealth. Its cultural significance is profound, often symbolizing purity, divinity, and power, as seen in artifacts like ancient Egyptian burial masks and religious objects worldwide. Major historical gold rushes, such as those in California and Australia, have significantly shaped economies and spurred large-scale migration and settlement.

Central Bank of Libya

The Central Bank of Libya is the primary monetary authority of Libya, established in 1956 following the country’s independence. It has played a critical role in managing the nation’s economy and currency, though its operations have been significantly impacted and divided by the political conflicts since the 2011 revolution.