The Central Bank of Libya (CBL) has agreed to issue letters of credit (L/Cs) to importers in a bid to dampen a hike in food prices and cash shortages in the country's banks.

The move had been anticipated since news emerged of a meeting last month that considered measures to improve L/C availability (DC World News, 14 March 2016).

Trade flows

Following a joint meeting between the CBL, the Audit Bureau, General National Congress and the Salvation Government, an agreement was reached to open US$2 billion of L/Cs at an exchange rate of around 1.38 Libyan dinars (LD1.38) to one US dollar.

The agreement aims restore imports of basic goods and medicines and end Libya's severe liquidity crisis.

Positive impact

Libya's liquidity crisis has led to some banks limiting withdrawals to less than LD500 dinars while others closed their doors. This angered customers and created recessionary pressure.

Analysts suggest that the move to restore L/C flows will have a positive impact on Libya's economy.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.