Youssef Mohammad Sawani is Professor of Politics and International Relations at the University of Tripoli in Libya.
Once awash in oil wealth, Libya has been trapped in what seems like a state of perpetual crisis since the fall of Moammar Gadhafi in 2011. While civil war and conflict over the past 13 years have left Libya broken, the country's woes are still deeply rooted in the legacy of Gadhafi's four-decade rule. While Gadhafi provided a degree of stability and directed oil revenues toward social programs, it came at a heavy cost. Economic diversification was stifled; entire sectors remained underdeveloped. Dependence on oil and state handouts flourished, with limited opportunities for entrepreneurship and private enterprise, which left the economy vulnerable to fluctuations in global oil prices. With his regime's iron fist suppressing any political dissent, Gadhafi eliminated not only any democratic governance, but a wider culture of open discourse and political participation. Libya lacked any institutions or mechanisms for a peaceful transfer of power, as Gadhafi intended.
In 2011, the uprising of the Arab Spring capitalized on all these vulnerabilities. Gadhafi's regime crumbled when NATO intervened to back rebel forces, but a power vacuum soon emerged, creating fertile ground for more foreign intervention that continues to this day—with the United States, Russia, Turkey, the United Arab Emirates, Qatar, Egypt, Algeria, Italy and France all vying for influence, but each with their own strategic and economic interests. This external meddling continues to exacerbate internal divisions, hindering national reconciliation. Some foreign actors have supported rival factions in Libya's divided east and west, fueling the flames of conflict.
The 2011 uprising unleashed a new wave of violence as those rival factions, some ideological and Islamist, others purely opportunistic, fought for power. Their backing by foreign powers created a complex web of allegiances and rivalries. This fragmented landscape became a breeding ground for extremism and unrest, constantly hindering attempts at rebuilding war-torn infrastructure and establishing a unified national government that was democratic, accountable and inclusive.
While civil war and conflict over the past 13 years have left Libya broken, the country's woes are still deeply rooted in the legacy of Gadhafi's four-decade rule.
- Youssef Mohammad Sawani
The international community, particularly the United Nations mission in Libya, known as UNSMIL, has prioritized holding elections as a path toward stability, despite many warnings that rushing into elections without addressing the root causes of instability is a recipe for disaster. Elections are not a quick fix. Flawed elections held without a genuine commitment to democratic principles risk worsening Libya's many underlying problems and sidelining vital issues like reconciliation. They would also alienate younger Libyans, a large segment of whom expresses frustration at the country's political and economic quagmire, yearning for either a return to a bygone era of (perceived) stability or a strong leader to restore order, even if it comes at the expense of democratic freedoms.
The many different armed groups in Libya, some with entrenched economic interests in the current chaos, act as spoilers, obstructing any prospect for national reconciliation and political reform. The lack of consensus on key issues like the constitution and how to either disarm or incorporate armed groups within a national security framework further complicates matters.
The dreams of elections and a unified Libyan government are held hostage by the latest domestic power struggles and interminable international meddling. Governmental authority itself is bitterly and physically divided—between the House of Representatives in Tobruk (Libya's parliament), the internationally recognized Government of National Unity in Tripoli, and the Libyan National Army led by Khalifa Haftar. The latest divisions have been over electoral laws that could benefit military figures like Haftar. Meanwhile, armed militias continue to operate with impunity, eroding any sense of central authority.
The human cost of this ongoing crisis is staggering. Libya's economy is in freefall, with many Libyans facing acute shortages of basic necessities because of a shrinking dinar and soaring prices. Delayed salary payments and cash shortages add to the daily struggles, especially during Ramadan, a time of traditionally higher spending. The recent decision by the speaker of the House of Representatives, Aguila Saleh, to accept the Central Bank governor's proposal to impose a controversial 27 percent tax—which many Libyans dub the corruption tax—on foreign currency exchange has made the situation even worse, as economists had warned. The tax essentially adds a surcharge on top of the official exchange rate when converting dinars to foreign currencies, most commonly the U.S. dollar.
Caught in a political stalemate with no end in sight, Libyans face a bleak future, forced to endure hardship while their leaders prioritize personal gain over national reconciliation. The lack of effective solutions has led to widespread disillusionment, with trust in government collapsing. The economic consequences of this political paralysis are devastating: The once-stable Libyan dinar has plummeted in value by some 80 percent against the U.S. dollar since 2011, based on official exchange rates, from 1.24 dinars to the dollar 13 years ago to effectively 6.15 dinars today with the new tax on foreign currency transactions. The dinar is worth even less on Libya's rampant black market.* The currency devaluation has triggered a domino effect of economic woes. Food prices have skyrocketed by nearly 50 percent in just the past year. Businesses hesitate to invest in such an unpredictable environment, further stagnating growth.
In Tripoli, the internationally recognized Government of National Unity, led by Prime Minister Abdulhamid Dbeibah, appears more focused on clinging to power than pulling Libya out of the abyss. Dbeibah has based his premiership on populist policies and a surge in government spending, often tainted by corruption allegations. Critics argue that these strategies aim to secure public support, appease powerful militias or make concessions to foreign countries in a bid to extend his term. The consequences of these maneuvers are evident in Libya's financial mess.
Will Libya's leaders prioritize unity and reconciliation for the sake of the rest of the country, or will they remain disastrously divided?
- Youssef Mohammad Sawani
Efforts to control inflation through price controls have proven unsuccessful, with the persistent depreciation of the dinar fueling public anger. This discontent has given rise to the parallel Government of National Stability, based in the east with the backing of the House of Representatives in Tobruk. It has echoed concerns raised by the Central Bank about alleged financial mismanagement by Dbeibah's government. The Government of National Stability aims to capitalize on public disillusionment, although its legitimacy is disputed by those who see it as a tool of Haftar while the House of Representatives is embroiled in its own political disputes.
The Central Bank, meanwhile, finds itself in a precarious position, with the bank's governor, Siddiq al-Kabir, caught in a tug-of-war with Dbeibeh's government in Tripoli. The bank is home to Africa's largest foreign exchange reserves and has been described as "the sputtering heart of Libya's oil-fueled economy." Under Kabir, the bank has assumed even more power over Libya's fractured political landscape, as one of the few functioning state institutions since 2011. Government spending has become impossible without the involvement of the Central Bank, and Kabir himself. But the bank has also come under more scrutiny, and Kabir has been criticized for his interventions in the economy and perceived lack of transparency.
In a move to steady the dinar, Kabir proposed the new 27 percent tax on foreign currency transactions, effectively devaluing the currency. The tax, according to Kabir, will generate an estimated $12 billion in revenue to help pay off public debt and fund development projects. The combined effect of the tax is expected to yield an exchange rate between 5.95 and 6.15 dinars to the U.S. dollar. The Central Bank last set the exchange rate in late 2020 at 4.8 dinars to the dollar, after different exchange rates were in effect for years across Libya in different areas controlled by rival factions.
While Kabir stresses the need for long-term economic recovery and is publicly pushing for the establishment of a unified government and unified national budget—which is seen as a direct challenge to Dbeibeh—his previous political maneuvering have eroded public confidence in the Central Bank. Many Libyans suspect the bank prioritizes the financial needs of powerful figures and militias—in part, as a way for Kabir to buy loyalty and keep himself in his position as Central Bank governor. There's also skepticism about the bank's actual ability to prop up the economy, given the scale of Libya's economic collapse.
Most devastating, though, is the impact of all this on Libyan society. Years of crisis have created a lost generation, as education suffered immensely from Libya's civil war and ongoing conflict. A country that once ranked high on the U.N.'s human development indicators saw all aspects of daily life suffer after 2011. Libya was ranked 55 out of 187 countries on the U.N.'s Human Development Index prior to 2011, but fell to 105 out of 189 countries by 2020. The mental and physical health of Libyans has deteriorated significantly, as the ever-present threat of violence and the constant struggle to meet basic needs have taken a toll. Easy access to weapons and the proliferation of armed groups have normalized daily brutality, especially for young people who have grown up amid a culture of impunity. Mental health services are scarce, leaving many Libyans struggling to cope with trauma and anxiety.
Will Libya's leaders prioritize unity and reconciliation for the sake of the rest of the country, or will they remain disastrously divided? Recent economic indicators suggest another looming crisis that could send Libya into even deeper turmoil. Libyans deserve so much better.
* Editor's note: This article has been updated to correct and clarify the extent of the Libyan dinar's devaluation since 2011.
