Libya's commercial banks transferred more foreign exchange in 2022 to cover letters of credit (L/Cs) or other transfers to Europe than to the rest of the world, according to the Central Bank of Libya's (CBL's) latest data on foreign exchange used by the country's commercial banks.

But the value of L/Cs used by Libyan commercial banks declined last year while the value of foreign exchange used by the state for L/Cs and transfers fell by nearly a third.

European links

Libya's commercial banks transferred 51 per cent of the total foreign exchange requested from the CBL to Europe, reflecting the country's geographical proximity and close trading links with its European neighbours.

In comparison, Arab countries accounted for 35 per cent of total requests, while Asian countries accounted for 10 per cent and countries in the Americas accounted for 3 per cent of the requests.

The data indicates weak trade exchanges between Libya and Australia and New Zealand combined accounting for just 0.7 per cent while African countries accounted for a meagre 0.3 per cent of the requests.

Forex trends

Total foreign exchange expenditures for all purposes during 2022 amounted to about US$28.5 billion, compared with US$24.6 billion in 2021.

But the use of foreign exchange by commercial banks for L/Cs fell by just over 10 per cent from US$10.7 billion in 2021 to US$9.6 billion in 2022.

The use of foreign exchange by the state for L/Cs and transfers fell by more than 30 per cent from US$2.9 billion in 2021 to US$2 billion in 2022, largely due to Libya's National Oil Company requiring US$614 million less foreign exchange last year than it did the year before.

Principle users

Al-Aman Bank for Trade and Investment, National Commercial Bank and Jumhurya Bank between them wrote 42 per cent of Libyan commercial banks' foreign exchange business in 2022.

Banks' purchase of foreign exchange for imported goods most frequently involved transactions between Libyan buyers and sellers in Turkey, European countries, China and Tunisia.

The CBL's report, Commercial Banks' Uses of Foreign Exchange During 2022, can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.