The Technical and legal evaluation of the Central Bank of Libya's publication regarding the Libyan dinar restricted deposit for obtaining foreign currency

Abstract

This study aims to evaluate the monetary instrument introduced by the Central Bank of Libya, namely restricted deposits in Libyan dinars linked to subsequent access to foreign currency, as an unconventional mechanism for addressing liquidity imbalances and distortions in the foreign exchange market. The study examines the extent to which this instrument can absorb cash circulating outside the banking sector, reduce pressure on the foreign exchange market, and enhance monetary stability. It also analyzes the instrument from the perspective of Islamic economics and Islamic financial jurisprudence, particularly regarding the rules governing currency exchange (ṣarf), the prohibition of loans that generate benefits, and the Sharīʿah characterization of the associated contractual arrangements.

The study adopts a descriptive-analytical approach and a case study methodology, in addition to constructing quantitative scenarios to estimate the potential impact of the instrument. The findings indicate that the instrument may achieve positive short-term outcomes; however, it requires institutional and Sharīʿah restructuring to ensure sustainability and efficiency.