By Jalel Harchaoui
To many Libyan households, the top security threat plaguing their daily lives isn’t the risk of being caught in the crossfire between contending militias, falling victim to a jihadi group, or being kidnapped for ransom.
A more unrelenting consequence of Libya’s dysfunctional politics is its monetary crisis. The principal manifestations—chronic shortage of dinar banknotes, along with a weak valuation of the Libyan currency in the black market—first emerged in 2014.
Unlike the ongoing civil war, which also began in 2014, the monetary crisis has consistently intensified through the months.
In Tripoli—where the population has swollen by one-fourth since 2011, to almost three million with the arrival of displaced families from other Libyan cities—hundreds of people stand in line daily from 10 at night until the morning to withdraw their paycheck money from the bank.
They often go home empty-handed. Similar scenes occur in Tobruk, Sirte, and elsewhere. The long waiting lines at banks sometimes degenerate into violent incidents, including shootings by the local militias that claim to “protect” the bank branch.
Those armed groups portray themselves as committed to law and order, but often engage in embezzlement and arbitrarily influence the distribution of money. As many Libyans suffer, luxury stores in the capital city are reminders that a sliver of the population is thriving financially.
How did this happen? Lack of physical security, although real, is not the root cause behind Libya’s monetary crisis. Rather, it has been the byproduct of a large government bureaucracy, unsustainable levels of welfare spending, and polarized governance.
After 2011, A Bloated Public Sector
Libya’s first post-uprising year—2012—was a good year for the country’s hydrocarbon sector. That, coupled with the return of pent-up private demand in non-oil sectors, boosted the unadjusted gross domestic product for that year to $82 billion—more than double 2011’s figure and 9 percent above 2010’s.
Importantly, Libya enjoyed access to over $100 billion of foreign-exchange reserves it had accumulated during the 2004-2010 period that had been frozen by Western powers in February 2011.