Have you heard of a country that forges its own currency? (A forger holding a candle)
A few days ago, the Central Bank of Libya released a video statement discussing four issues of the Libyan currency of 50 dinars currently circulating in local markets. The statement indicated that two of these issues are legitimate and two are counterfeit. Shortly after the video release, several commercial banks announced receiving a directive from the Central Bank of Libya to gradually withdraw the 50-dinar note from circulation, giving citizens, companies, and public and private entities until the end of business on August 29, 2024, to deposit their 50-dinar notes at the banks for permanent withdrawal. The directive did not explicitly state that the third and fourth versions of the currency would not be accepted by the banks, but it implied as much by emphasizing that depositors should sort their money according to the first and second approved issues.
What are the reasons behind this decision? What are its direct and indirect implications on the Libyan economy and the Libyan citizen? Will this decision end currency forgery? What will happen to the counterfeit money currently outside the banks and in the possession of citizens? This is what we will attempt to discuss briefly in the following lines .
The decision to withdraw the 50-dinar note from circulation was not surprising; it was expected. Several statements by the Governor of the Central Bank of Libya had preceded it, confirming the presence of counterfeit currency in the markets described as (of unknown origin). In February, he sent a letter to the Speaker of the House of Representatives informing him that the Central Bank would issue a decision to withdraw this denomination of Libyan currency from circulation due to rising forgery rates and the difficulty of distinguishing it among citizens, as well as its significant damage to the economy and its use in illegal activities, according to his description.
Therefore, the reasons for this decision are to control the forgery crisis that has recently surfaced, which the Government of National Unity attributes to the rise in foreign currency rates and the depreciation of the Libyan dinar. The government claims that – unnamed entities – are printing counterfeit 50-dinar notes to finance dollar purchases from the parallel market, leading to higher foreign currency rates and liquidity shortages in banks
Other reasons include regulating the monetary market, enhancing confidence in the national currency, and maintaining the new exchange rate for foreign currency sales, after the counterfeit currency crisis was one of the main reasons for the Central Bank's failure to defend the old exchange rate.
But can’t this entity responsible for parallel spending – which everyone seems to know but no one wants to name – now turn to printing the twenty-dinar denomination, which has become the highest value in circulation among currency denominations? The entity that counterfeits money forged the fifty-dinar note because it is the highest value, not because it’s their lucky number, or because their equipment and printers are adjusted for it and cannot work now after its withdrawal. If the currency withdrawal is to solve the forgery crisis, it is a foolish and ill-considered decision. Today we suffer from counterfeit fifty-dinar notes, and tomorrow we will suffer from the twenty, so we withdraw it to then suffer from the ten, and so on. Our suffering will continue until we have the courage to face its causes. If the Central Bank – the highest monetary authority in the country – is even unable to mention the name of the entity forging the currency, then its decisions to address the current crisis and subsequent crises will be mere eye-wash and distraction from the underlying problem that will persist. The forger – unknown – will need only to change the settings on his printers to flood the market with the highest denomination after the economic wizards withdraw the preceding one .
The impact of this decision on the Libyan citizen can be diverse and complex. While the primary goal is to enhance confidence in the national currency, this could lead to negative impacts on citizens' daily lives, such as increased difficulty in accessing cash and higher financial costs for some daily transactions, especially with many shops and markets refusing to accept the fifty-dinar note from citizens, prompting them to rush to banks to get rid of the currency to be withdrawn, while the same banks, through ATMs, redistribute the same currency to citizens wanting to withdraw cash from their accounts, returning us to the same vicious circle, meaning in Libyan dialect (using his own beard to twist a rope).
Moreover, this decision could significantly impact the Libyan economy, especially concerning the banking and commercial sectors. Banks and financial institutions may face challenges in managing liquidity and providing adequate financial services to citizens and companies. This decision might also reduce cash circulation volume and increase reliance on electronic payment methods, which have not yet gained citizens' trust, with unstable and unreliable services that will not succeed anytime soon in replacing traditional currency, which the monetary authorities have failed to protect, neither in terms of value nor authenticity .
Additionally, this decision will not end currency counterfeiting as we mentioned; the forger will turn to printing other currency denominations, and perhaps has already done so, and soon the governor will talk about counterfeit currency flooding the markets, maybe this time in the twenty-dinar denomination.
It would have been more appropriate for the Central Bank of Libya, the Ministry of Finance, and others to name the entity counterfeiting the currency, rather than merely hinting at it with implicit accusations, and to take practical steps to stop counterfeiting operations instead of treating it as a given and dealing with its repercussions .
Finally, what is the fate of the counterfeit money currently outside the banks and in the possession of citizens? Banks have clearly indicated they will not accept it. What is the fault of the citizen to bear the burden of the state's failure to protect the currency? Worse still, the citizen bears this burden twice, first by enduring the devaluation of the local currency due to counterfeiting, leading to a significant rise in the prices of goods and services, and second by losing money acquired through legitimate means but from denominations the state failed to protect from widespread circulation – and even contributed to by remaining silent about the forger despite knowing who they are.
The entity that forged the currency financed the purchase of millions of dollars from the parallel market, causing the dollar's price to rise, and consequently raising the prices of all goods without exception. Thus, the forger now holds legitimate foreign currency, while citizens hold counterfeit money that banks will not accept. Even with the existence of this money and before the decision to withdraw it, citizens' lives were not easy; they were difficult and complicated, worsened by the rising prices. Now, they must suffer again from being deprived of their money, which was already insufficient, and they must cheer for the unknown forger, the known legislator, the governor who did not govern, and the trustee who was not trustworthy. They must attribute the consequences of these actions to the political opponents of the faction they support, while for their rights and their children's rights, they can only wait for their symbols' victory to grant them those rights, as the principle that rights are seized, not given, seems to be counterfeit in our country .