This is no way to run a currency. When Libya descended into civil war in February, central bank governor Farhat Omar Bengdara left the capital Tripoli because communications had failed and he couldn’t carry out the routine daily transactions that the Bank of Libya has to do. Next, he departed the country altogether as Muammar Gaddafi summarily appointed a replacement. Then all the bank’s foreign exchange assets, mostly held in the US and Europe, were frozen. Finally, the British government stopped a ship carrying £900m worth of brand-new dinar notes to Tripoli. As Bengdara points out, Libya is running out of money and the people will suffer.
Once again, the revolutions in the Middle East show how vital a nation’s currency is in the daily lives of its people. Let’s look at how the currencies fared.
For all these currencies, it will be a long fight back for respectability in the markets. Meantime the value of the two dinars and the Egyptian pound shrinks in the populations’ pockets.
– Tunisia’s 50 year-old dinar (TND) isn’t convertible, so it’s hard to tell exactly how it’s survived the revolution but we do know it’s taken a battering. It would be “difficult, difficult”, said central bank governor Mustafa Kabel Nabli about keeping to a deadline of 2014 for full convertibility in the wake of the crisis. Nor will it help that Moody’s has cut Tunisia’s credit rating to Baa3 and could lower it further. A big problem is the strength of the dinar depends on trade with Libya and that’s in a state of collapse.
– When the anti-Gaddafi movement began to mobilise, the 40 year-old Libyan dinar (LYD) held its own and even strengthened for a few days. When the dictator’s air force started strafing his own cities in early March, it went into freefall. The currency’s immediate future looks grim as everybody who can rushes to unload it, including expat workers like the 10,000 Filipinos who fled back home with suitcases full of suddenly unwanted dinars.
– Oldest of the three currencies, the Egyptian pound (EGP) has had a wild ride for nigh on 150 years. It was consecutively tied to the gold standard, the British pound and the greenback before it was floated in 1989, but only in the most technical sense under the Mubarak regime which kept a tight grip on the Gineih, as it’s also known. And the ride is getting wilder as tourism and foreign exchange flows grind to a halt. Trading in the currency, always thin, has also practically stopped. There’s only $35bn in reserves and it now takes nearly six Egyptian pounds to buy a greenback.
