Libya allows imports with parallel-market dollars

The move matters economically because Libya’s import system is one of the main channels through which foreign currency is allocated, and bank-led financing has long been scarce, slow and politically contested. By formalizing parallel-market settlement, the government is acknowledging that the commercial banking system and the Central Bank of Libya cannot process enough trade finance to meet demand, especially for smaller traders and SMEs that often do not qualify for letters of credit.

That has broader consequences for inflation, liquidity and the distribution of gains across Libya’s economy. Importers with access to bank-financed letters of credit have long enjoyed cheaper official hard currency, while smaller businesses have been pushed into the more expensive parallel market. The decree may ease bottlenecks and keep goods flowing, but it also risks embedding a two-tier import structure that reinforces price distortions and raises costs for consumers.

The policy also exposes the limits of Tripoli’s authority. Analysts say the capital cannot enforce a uniform trade-financing regime across ports controlled by eastern forces aligned with Khalifa Haftar, making any centralised import policy incomplete by design. That weakens the state’s ability to steer commerce, tax trade consistently or curb rent-seeking around foreign exchange allocation.

For investors, the immediate takeaway is not a near-term liberalisation story but a signal that Libya’s trade regime remains unstable and heavily policy-driven. The decree could support import volumes for cash-based traders and border commerce, yet it does little to resolve the structural issues keeping the country dependent on the parallel market and vulnerable to abrupt rule changes. Any business with exposure to Libyan trade, logistics or distribution will still have to price in policy reversals, fragmented enforcement and FX volatility.

The latest U-turn suggests the authorities have chosen pragmatism over formal control, but without reform of the banking system, import licensing and customs administration, the underlying problem is likely to persist. The key question for markets is whether the decree becomes a managed workaround or another short-lived fix in Libya’s recurring cycle of trade-policy retreats.