Country Report Libya November 2009

Outlook for 2010-11: Monetary policy

Although Libya has historically pursued a largely passive monetary policy, mainly as the currency is pegged to the IMF's special drawing rights (SDR), the Central Bank of Libya has recently stepped up efforts to reduce excess liquidity by raising benchmark interest rates by 1 percentage point in 2008, increasing bank reserve requirements and introducing certificates of deposit with 91-day maturities. Pressure on the Central Bank to overhaul its approach to monetary policy and regulation of financial services is likely to increase as the banking sector is liberalised. State-subsidised credit institutions are currently crowding out commercial bank lending, and efforts will be made to reform them.

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