Home Northern Africa Libyan Government Reinstates Banking-Only Import Rule to Curb Black Market and Inflation

Northern Africa

Libyan Government Reinstates Banking-Only Import Rule to Curb Black Market and Inflation

July 3, 2025

(3 Minutes Read)

The Tripoli-based Libyan Ministry of Economy and Trade has instructed the Libyan Customs Authority to begin enforcing Decree No. 42 of 2025, which bans all imports and exports unless conducted through banking transactions authorised by the Central Bank of Libya (CBL). This policy will be applied uniformly across all Libyan ports of entry.

Originally announced in the first quarter of 2025 and scheduled for implementation on April 1st, the decree was postponed following pushback from small-scale importers who rely on cash transactions to operate.

The renewed push comes at the behest of the Central Bank of Libya as part of a broader strategy to reduce reliance on the black-market for foreign currency, stabilise the Libyan dinar, and combat inflation. This marks a continuation of previous, though unsuccessful, efforts—such as Decree 560 of 2020 under the Faiez Sarraj government—to regulate foreign trade exclusively through the banking system.

However, enforcement may prove challenging. The eastern-based Libyan authorities have not indicated whether they will adopt the measure. A lack of nationwide implementation could simply shift trade flows to eastern ports, allowing goods to enter western Libya by land and undermining the policy’s goals.

The CBL’s Letter of Credit (LC) system has historically been constrained by restrictive government-imposed lists of “essential” goods eligible for bank financing. This has often forced importers to rely on black-market currency or funds held abroad to bring in goods not covered under the official list.

Libya’s persistent budget deficit—fueled by political instability, over-reliance on oil revenues, and underdeveloped domestic industries—has added pressure to preserve dwindling foreign currency reserves. The lack of effective customs controls and failure to implement meaningful import duties have further exacerbated the situation.

The CBL’s requirement that a portion of LCs be paid in cash is intended to draw hoarded currency out of households and back into the banking system, helping to alleviate the country’s liquidity crisis. Years of economic mismanagement and eroding trust in financial institutions have led Libyans to stash money at home, leaving banks without adequate cash reserves.

However, restricting trade to official bank channels excludes a wide array of goods and hampers the operations of small businesses, many of which operate in the informal sector and use cash-based systems to avoid taxes and bureaucratic hurdles. These businesses, along with private sector traders, often meet market demand by sourcing foreign currency on the black-market—contributing to a cycle of inflation and rising living costs.

The Ministry’s move could help bring informal businesses into the tax net and enhance oversight. However, implementation remains uncertain, especially in cross-border contexts. Many Tunisian and Egyptian SMEs and farmers, for instance, conduct real-time, seasonal trade with Libyan buyers via cash transactions, often bypassing the banking system altogether. These traditional practices may be difficult to disrupt without causing supply shocks in perishable goods. In sum, while the decree aims to tackle long-standing economic distortions and stabilise Libya’s currency, its success will depend heavily on national coordination, enforcement capacity, and the government’s willingness to engage with the realities of the informal economy.