Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

SOCIALIST PEOPLE’S LIBYAN ARAB JAMAHIRIYA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of March 31, 2007)

Status under IMF Articles of Agreement
Article VIIIDate of Acceptance: June 21, 2003.
Exchange Measures
Restrictions and/or multiple currency practicesThe staff report for the 2005 Article IV consultation with Libya states that as of March 1, 2006, IMF staff was awaiting the necessary clarifications from the authorities before the review of the exchange restrictions can be completed. (Country Report No. 06/136)
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)Yes.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Libya is the Libyan dinar.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementThe Libyan dinar is pegged to the SDR at LD 1 per SDR 0.5175. The margin on sales of foreign exchange is 0.5%. For foreign exchange cash sales, the Central Bank of Libya (CBL) adds 1% to the noncash selling rate to account for cash transportation and insurance costs. The margin on selling rates applicable to money orders is 1.5%.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirementsAll transactions with Israel are prohibited. Transactions with other countries are made in convertible currencies. On February 18, 2007, the CBL signed an agreement with the Central Bank of Tunisia under which the Libyan dinar and the Tunisian dinar became convertible with each other for personal uses through banks and exchange bureaus up to LD 4,000 or TD 4,000 a transaction for each resident of the two countries annually. The agreement became effective March 20, 2007.
Controls on the use of domestic currencyn.a.
Use of foreign exchange among residentsTransactions may be executed through the use of the Libyan dinar as a middle currency in determining the exchange rates.
Payments arrangements
Bilateral payments arrangements
OperativeAgreements are maintained with Algeria, Morocco, and Tunisia. Outstanding balances are settled in convertible currencies 15 days after the end of each month. These arrangements became operational on January 1, 2007.
InoperativeThe arrangement with Malta was terminated May 8, 2006.
Regional arrangementsLibya is a signatory to the GAFTA.
Administration of controlThe CBL administers exchange controls and has delegated some powers to authorized banks. The General People’s Congress regulates policy on imports and exports, which is executed by the Secretariat of Economy and Commerce (SEC).
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
On domestic ownership and/or tradeResidents may freely purchase, hold, and sell gold in any form other than bars.
On external tradeImports of unworked gold are duty-free.
Controls on exports and imports of banknotes
On exports
Domestic currencyResidents and nonresidents are allowed to export Libyan currency up to LD 50 (nonconvertible).
Foreign currencyResidents and nonresidents may export any amount of foreign exchange for personal, noncommercial purposes through authorized banks. To control money laundering, ceilings of the equivalent of $5,000 and $10,000 a transaction are enforced on the purchase of foreign exchange in cash and traveler’s checks, respectively. However, all bona fide requests above these limits are satisfied without prior approval of the CBL.

Foreign exchange converted into Libyan dinars by visiting tourists may be reconverted on departure.
On imports
Domestic currencyResidents and nonresidents are allowed to import Libyan currency up to LD 50 (nonconvertible).
References to legal instruments and hyperlinksn.a.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResident individuals are allowed to keep foreign currencies in domestic bank accounts and to transfer balances abroad without restriction. Exporters are allowed to retain foreign exchange earnings in a special account that may be used to finance imports of raw materials, spare parts, and machinery needed for export production. The National Oil Co. is required to keep its foreign exchange account at the CBL. Private companies are required to keep their foreign exchange export proceeds at domestic commercial banks.
Held abroadn.a.
Approval requiredn.a.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyTransfers from resident dinar accounts to a foreign currency account require submission of a pro forma invoice only for business purposes.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Approval requiredYes.
Domestic currency accountsNonresident accounts are determined on the basis of the duration of residency of the account holders in accordance with the IMF’s Balance of Payments Manual. Nonresidents who are employed in the country are permitted to open these accounts, which may be credited with their legitimate earnings. All other credits to nonresident accounts require the prior approval of the CBL.



Funds brought in by nonresident contractors undertaking contracts in their own names must be kept with an authorized bank. Payments received by contractors for contracts may also be credited to these accounts, but, in general, remittances are permitted up to the net-of-tax amount specified in the contract. Funds brought in by nonresidents may be reexported if not used, after submission of evidence. Accounts held by foreign contractors licensed under Law No. 5 (1997) for the promotion of foreign capital investment are exempt from any restrictions. Remittances from nonresident accounts are free and do not require any prior approval of the CBL.
Convertible into foreign currencyThese accounts may be converted, but approval is required.
Approval requiredYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Minimum financing requirementsThe CBL requires commercial banks to impose a cash margin of no less than 15% on LCs opened for imports (in practice, the cash margin requirement ranges from 15% to 100% depending on the creditworthiness of importers).
Documentation requirements for release of foreign exchange for imports
Domiciliation requirementn.a.
Preshipment inspectionn.a.
Letters of creditAuthorized banks may open LCs without approval from the CBL. Before an LC is established, a marine insurance policy from a local insurance company must be submitted.
Import licenses used as exchange licensesExchange permits required for imports are readily granted by authorized banks, provided a firm contract exists.
Othern.a.
Import licenses and other nontariff measuresImport licenses are not required. However, importers may import only the types of products that relate to their business specialty. Effective January 1, 2006, the state monopoly on imports is limited to petroleum products and weaponry. Previously, strategic goods (i.e., seven essential food items, medicines, insecticides, petroleum products, tobacco, and gold) could be imported only by public corporations, whereas all other goods could be imported by public or private entities.
Negative listEffective January 1, 2006, import bans for religious, health, and ecological reasons are limited to fewer than 10 products. Previously, imports of the following were prohibited: live pigs, meat, fat, skins, or other pork products; alcoholic beverages and spirits of all types; preserved meats and foods prepared with them; animal fats for consumption; frozen fish, except for sliced fish and tuna for manufacturing purposes; eggs for direct consumption; live or slaughtered poultry and birds, with the exception of breeding stock; cucumber seeds; fresh fruit (citrus fruit, grapes, figs, apricots, watermelon, dates, peaches, plums); olive oil; fresh, frozen, dried, or ground vegetables ready for consumption, except for dried legumes; mineral water, natural or carbonated; buses more than five years old, with a capacity of fewer than 30 passengers; buses with a capacity of more than 30 passengers; trucks and tractor-trailers more than 10 years old that are designed for civilian use with a capacity of 5-40 tons and one, two, or three axles; ribbed sheet iron; school notebooks; paper tissue products, with the exception of table napkins, pocket tissues, and toilet paper rolls; robes and cloaks; ordinary hand brooms; caustic soda of all kinds and potash; plastic covers for greenhouses and pipes made of PVC, with the exception of drip irrigation tubes; and bread flour additives containing potassium bromate.
Open general licensesn.a.
Licenses with quotasn.a.
Other nontariff measuresAll imports from Israel are prohibited. Importers are required to deal directly with producers abroad and not through intermediaries.
Import taxes and/or tariffsThe tariff rate has been adjusted to zero for all imported goods with the exception of some tobacco products that are subject to a 10% rate. Effective March 10, 2006, a consumption tax of 15% to 25% (previously, 25% to 50%) applies to a list of 81 imported goods that are also produced locally. A general service fee of 4% is imposed on all imported goods. All products from Arab countries are exempt from customs duties, provided domestic value added is at least 40%.
State import monopolyNo.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsAll proceeds must be repatriated within three months of shipment.
Surrender requirementsExporters are allowed to retain up to 100% of nonhydrocarbon earnings. The previously existing surrender requirements have been abolished with the adoption of the Banking Law (2005).
Financing requirementsNo.
Documentation requirements
Letters of creditAll exports require the opening of LCs.
Guaranteesn.a.
Domiciliationn.a.
Preshipment inspectionn.a.
Othern.a.
Export licensesIn general, exporters do not need export licenses but must register with the SEC and supply on a regular basis the relevant documentation on their exports. Exports of electricity, hides, nonmonetary gold (other than for processing abroad), paper products, school supplies, scrap metal, and telecommunication services are prohibited. Exports or reexports of vegetable oils, wheat, wheat flour, crushed wheat, barley, rice, coffee, tea, sugar, and semolina—all of which are subsidized products—are prohibited. All exports to Israel are prohibited.
Without quotasExport licenses are required for raw wool, hides and skins, and agricultural products.
With quotasn.a.
Export taxesn.a.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersPayments for invisibles related to authorized imports are not restricted.
Investment-related paymentsProfits generated by foreign capital invested in projects deemed to contribute to the economic development of the country may be transferred freely to the country of origin. Profits generated by foreign capital invested in projects set up within the context of Law No. 5 and approved by the Foreign Investment Board (FIB) may also be transferred without restriction. A Jihad tax of 4% applies on profits and dividends of nonresidents and residents.
Payments for travelResidents are allowed to purchase foreign exchange for tourism from authorized banks up to the equivalent of $10,000 in traveler’s checks or $5,000 in cash.
Prior approvalYes.
Indicative limits/bona fide testYes.
Personal paymentsResidents are allowed to purchase foreign exchange for education, medical treatment, and family remittances from authorized banks up to the equivalent of $10,000 in traveler’s checks or $5,000 in cash.
Quantitative limitsYes.
Indicative limits/bona fide testn.a.
Foreign workers’ wages
Indicative limits/bona fide testn.a.
Credit card use abroadn.a.
Other payments
Prior approvalYes.
Quantitative limitsn.a.
Indicative limits/bona fide testn.a.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirementsAll foreign exchange receipts must be surrendered.
Surrender to the central bankn.a.
Surrender to authorized dealersn.a.
Restrictions on use of fundsn.a.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Surrender requirementsn.a.
Controls on capital and money market instrumentsThe purchase abroad of these instruments by residents requires approval.
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsn.a.
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsn.a.
Bonds or other debt securities
Purchase locally by nonresidentsn.a.
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsn.a.
On money market instruments
Purchase locally by nonresidentsn.a.
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsn.a.
On collective investment securities
Purchase locally by nonresidentsn.a.
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsn.a.
Controls on derivatives and other instrumentsn.a.
Controls on credit operationsPublic enterprises are allowed to sell any amount of foreign exchange they earn to open or settle credit through the banking system, provided they report the sources and uses of the foreign exchange.
Commercial credits
By residents to nonresidentsYes.
To residents from nonresidentsn.a.
Financial credits
By residents to nonresidentsn.a.
To residents from nonresidentsYes.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsn.a.
To residents from nonresidentsYes.
Controls on direct investment
Outward direct investmentFor prudential reasons, the CBL has prohibited the purchase of foreign exchange by commercial banks for investment abroad.
Inward direct investmentFull foreign ownership is permitted in ventures established in the context of Law No. 5 and approved by the FIB. Approval is granted for projects that lead to domestic job creation or training, use of local raw materials, transfers of technology, and inflows of foreign currencies.
Controls on liquidation of direct investmentForeign capital invested in projects deemed to contribute to the economic development of the country may be transferred freely to the country of origin. Capital invested in projects set up in the context of Law No. 5 and approved by the FIB may also be transferred freely to the country of origin. Effective January 1, 2006, the lower limit on foreign direct investment in the non-oil sector was reduced to the equivalent of $1.5 million.
Controls on real estate transactions
Purchase locally by nonresidentsYes.
Sale locally by nonresidentsn.a.
Controls on personal capital transactionsn.a.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadn.a.
Maintenance of accounts abroadn.a.
Lending to nonresidents (financial or commercial credits)n.a.
Lending locally in foreign exchangeArticle 53 of Law No. 1 of 2005 (Banking Law) allows commercial banks to extend loans in foreign currency, provided sufficient collateral is presented. Banks may also borrow from each other through interbank lending.
Purchase of locally issued securities denominated in foreign exchangen.a.
Differential treatment of deposit accounts in foreign exchangen.a.
Differential treatment of deposit accounts held by nonresidentsn.a.
Investment regulationsn.a.
Open foreign exchange position limitsn.a.
Provisions specific to institutional investorsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
Arrangements for payments and receiptsMay 8. The payments arrangement with Malta was terminated.
Imports and import paymentsJanuary 1. The state monopoly on imports was limited to petroleum products and weaponry.

January 1. Imports bans for religious, health, and ecological reasons were reduced to fewer than 10 products.
March 10. The consumption tax on a list of 81 imported goods was reduced to 15% to 25% from 25% to 50%.
Capital transactions
Controls on liquidation of direct investmentJanuary 1. The minimum limit on foreign direct investments on the non-oil sector was reduced to the equivalent of $1.5 million.
Changes during 2007
Arrangements for payments and receiptsJanuary 1. The bilateral payments arrangements with Algeria, Morocco, and Tunisia became operational.



March 20. The agreement between the CBL and the Central Bank of Tunisia, signed on February 18, 2007, became effective, allowing the Libyan dinar and the Tunisian dinar to be convertible with each other for personal uses through banks and exchange bureaus up to LD 4,000 or TD 4,000 a transaction for each resident of the two countries annually.

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