Despite oil wealth, Libyans are hit by a slump in purchasing power

The depreciation of the Libyan currency has caused a sharp rise in the prices of basic goods in the country – Copyright AFP Mahmud Turkia

Rome TAHER

Libya may sit on Africa’s largest oil reserves, but many families are struggling with rapidly rising consumer prices as the Muslim holy month of Ramadan approaches.

As currency depreciation has increased the cost of imported food and other goods, said trader Mohamad al-Weheshi, 29, “we have to make do with the bare minimum”.

With a monthly income of around $150 at the official exchange rate, he said, “soon we will have to do without meat”.

The Libyan dinar – which officially trades at 4.8 to the US dollar – recently fell from around five dinars to the dollar on the parallel market to 7.5 today.

Economic analyst Abubakr al-Tur said “Libya is experiencing a critical situation with rising prices and currency devaluation”.

This, he told AFP, had “a big impact on the purchasing power of citizens who are increasingly unable to obtain basic products”.

Pointing to recent business closures and layoffs, the analyst said “it’s difficult and it’s affecting all but the richest classes.”

Interim Prime Minister Abdulhamid Dbeibah, who leads the UN-recognized government in Tripoli, said on Tuesday that his government “shares the concerns of Libyans”.

He said he was “committed to bringing the dinar back to the level before”, evoking “conspiracies hatched to exploit human hardship” and “maintain instability” in Libya.

– bloated state sector –

Libya is still struggling to recover from years of war and chaos since longtime dictator Muammar Gaddafi was toppled in 2011 and remains divided between two rival administrations.

The North African country of seven million people is plagued by instability and corruption.

Dbeibah’s government in Tripoli is uneasily sharing power and funds in Libya with a rival administration in the oil-rich east backed by military strongman Khalifa Haftar.

Libya earns around $20 billion a year in net revenue from oil and gas exports, which accounts for roughly 95 percent of government revenue.

Much of this wealth pays for a bloated public sector that employs nearly a third of the population, as well as state subsidies that were supposed to guarantee low prices for fuel and, until recently, basic food.

Dbeibah launched major infrastructure projects, with construction cranes now dotting the capital, as part of an economic program called “Return to Life”.

Analyst Tur said that “the government has indeed implemented reforms and reconstruction projects” but that these programs remain “inadequate”.

– “Pensioners suffer the most” –

The cost of living crisis and foreign cash crisis come after Libya’s central bank announced moves it said were aimed at ensuring greater financial stability.

It restricted import letters of credit — the only legal means for importers to buy products in foreign currencies — to purchases of medicine and food abroad.

This forced importers of cars, machine tools and construction equipment to turn to the parallel market to find foreign currency.

Foreign currency purchases by citizens, meanwhile, were capped at $4,000 per person per year, up from $10,000.

Household purchasing power has been further affected as the prices of staple foods such as pasta, rice, sugar and flour, previously largely subsidized, are now indexed to the dollar level on the parallel market.

Meanwhile, the payment of government salaries for 2.3 million Libyan civil servants and pension payments have also been delayed in recent months.

So as prices rise, “the pensioners suffer the most,” said Mohamad al-Werfalli, 65, who was shopping with his wife at a supermarket in Tripoli.

“Our pensions have fallen in value, especially for civilian employees,” he said, adding that seniors are now “spending time waiting for their pensions to be paid.”

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