Economist rejects fears over Libya debt settlement law

Libya’s House of Representatives has published a law authorising the settlement of public debt accumulated up to 2025, estimated at 303.4 billion Libyan dinars, prompting political and public debate over its potential economic impact.

Under the law, the debt would be serviced through a mechanism allowing the Central Bank of Libya to deduct 3% from future state revenues. Several political figures and commentators have criticised the move, warning that repayment could place further strain on the economy and weaken the Libyan dinar.

But prominent Libyan businessman and economic commentator Husni Bey said opposition to the settlement lacks economic justification, arguing that the financial cost of the debt has already been borne by citizens.

“The damage has already occurred,” Bey said, pointing to years of inflation, a sharp depreciation of the dinar and the depletion of foreign currency reserves.

Libya’s reserves have fallen from about $120 billion in 2011 to roughly $85 billion today, a decline of around $35 billion. At an average exchange rate of 6.25 dinars to the dollar, that loss alone equals more than 188 billion dinars, accounting for a significant portion of the accumulated debt, he said.

Bey added that monetary data shows public debt was effectively financed through monetary expansion rather than economic growth. The money supply has risen from about 79 billion dinars in 2011 to roughly 190 billion dinars today, an increase of around 111 billion dinars, largely reflected in bank deposits held by citizens.

“This confirms deficit financing through money creation, which inevitably fuelled inflation,” he said.

Addressing concerns over recent government spending, Bey said that in 2025 only around two billion dinars were added to the money supply. He said most spending, including in eastern Libya, was financed through foreign exchange fee revenues and the sale of foreign currency rather than new money printing.

According to his analysis, about $28 billion in foreign currency sales at an average exchange rate of 5.4 dinars per dollar generated more than 150 billion dinars, which, alongside revenues from the 15% foreign exchange fee, was sufficient to cover expenditures.

Bey said settling the debt would not create new money, increase inflation or further weaken the currency. Instead, he argued, it would help clean up public balance sheets, restore institutional clarity and reduce financial risks.

“Keeping the debt unresolved offers no economic benefit,” he said. “It only prolongs uncertainty and increases the risk of further pressure on the dinar.”