Libya is a North African nation whose northern border lies on the Mediterranean Sea. From as early as 5th century BC, the coastal region of Libya was occupied by the Afro-Asiatic descendants of the Berbers. For extended periods of time, Libya was under foreign rule. The nation was ruled by Egyptians, Persians, Greeks, Romans, and Arab Ottomans. Libya formed an important commercial region in the Sahara desert and attracted traders from Europe and Asia. Barter trade was the main method of trade in the region. The Arab Ottomans were the first to introduce formal currency in Libya, which was in the form of silver coins and was referred to as qirsh.
In 1911, Italians seized control of Libya and made the nation their colony. The colonizers introduced the Italian lira as the official currency in Libya. The lira was used as the legal tender until Libya gained independence in 1951.
Libyans were excited to attain self-rule after many centuries of colonial rule. They immediately abandoned the Italian currency and established the Libyan pound. At the time of issue, the Libyan pound was of equal value to the sterling pound. The pound was subdivided into 100 piastres. The currency came in the form of coins and banknotes of varying denominations. The Libyan pound was in circulation for only two decades and was replaced shortly after the revolution in 1969.
The new Libyan currency, referred to as the dinar, replaced the Libyan pound in 1971. The replacement followed a coup in which Libya’s authoritarian ruler, Muammar Gaddafi, overthrew King Idris. The dinar was issued at an equal value to the Libyan pound. One Libyan dinar is made up of 1,000 dirham. Libya’s Central Bank is responsible for producing, issuing, and regulating the dinar from the National Bank of Libya. Banknotes issued after 1971 bore Muammar Gaddafi’s portrait on them. The dinar is still the legal tender in Libya. In recent releases, the Arabic writings on the banknotes have been replaced with English text. The new notes have improved designs and additional security features that are aimed to minimize cases of fraud.
Decline of Libyan Dinar
Over the years, the Libyan dinar has steadily dropped in value against major currencies such as the US dollar, British pound, and the euro. The continued decline in value can be attributed to multiple factors. The main reason for the drop in the value of the Libyan currency was decreasing oil prices in international markets. Libya’s primary source of foreign currency is oil sales, and therefore the drop in oil prices has led to a negative impact on the dinar. The other factor is poor leadership by Muammar Gaddafi. During his reign, Libya undertook numerous major projects which strained the county’s budget. As a result, the country’s economy suffered from insufficient funds which led to the decline of the Libyan dinar. Libya has experienced significant political unrest and terrorist invasions in the past five years. This instability has immensely affected production in Libya, and as a result, the country’s currency has dropped in value. Poor regulation of the foreign exchange market has led to a thriving black market for foreign currency. The unregulated black market has also driven the decline of the Libyan dinar.