The Mysterious Libyan Coins


In my last post related to the economy in Libya, Khadijateri said "Are Libyans too lazy to carry coins? Are they [the coins] too heavy to lug around? Or is the problem that they are so difficult to count?".

I don't think any of these choices is the right answer :)

But it is not the first time that this issue has been brought to my attention....



Last year Khadijateri had already noted : "Another thing I can't understand is why people here [in Libya] hate using coins. When they raise the prices on goods in the shops they usually add a quarter of a dinar because that is the smallest banknote used here. When I first came to Libya, in 1989, using coins was common. It certainly would be better if they went back to using them again and then only raising the prices a few cents at a time instead of in big chunks."



I can't really state that Libyans hate using coins or are too lazy to do so, because we do use them overseas and we know how to and we also use them when available. The fact that at least in 1989 i.e . 20 years ago and some years after for sure, they were available is proof enough that we do love our coins. Are we too lazy or are the coins too heavy? Surely that can't be the case for all Libyans?

Our salaries are not always a perfect round number but would be something like this : 300 Dinars and 0.631 Dirhams, if I get this in cash then I would either receive 0.500 Dirham or 0.750 Dirham depending on the mood of our cashier. But most of us receive our money in our bank accounts and so those precious Dirhams accumulate and I like it this way. We also would love the prices not to rise in such increments as mentioned above because the smallest paper denomination is 0.250 (or 25 ) Dirhams. Why buy 5 breads instead of one only ?

"Until 1975, old coins denominated in milliemes (equal to the dirham) circulated. In 1975, coins were introduced in denominations of 1, 5, 10, 20, 50 and 100 dirham which bore the coat of arms of the Federation of Arab Republics. These were followed in 1979 by a second series of coins, in the same denominations, which bore a design of a horseman in place of the arms. ¼ and ½ dinar coins were issued in 2004. [1] 1, 5, 10, and 20 dirham coins are rarely used, if ever, as units of exchange. However, they still retain their status as legal tenders. [source]

See the old and new sets of coins here - but you need to scroll down to Libya:

The next logical question is why has the circulation of coins dwindled in Libya?

Theories:

(1) In the late 80's I remember reading in the local newspapers about the caravans of cisterns filled with coins that were busted on their way to cross the border to Egypt. Someone had been smuggling our coins outside the country. You can imagine how many coins can one cistern carry? But what would Libyan coins buy you in Egypt I used to think ? nothing really their value lay in the quality of the alloy they were made from.

(2) Greedy Libyan merchants were hoarding coins in order for the price increase to be large. Instead of 5 or 10 Dirham they would 'have' to raise it to 25 at least.

(3) The country was not minting enough coins.


Whatever it was the circulation of coins continued to decrease slowly but surely. At one point coins became so rare that I started collecting them each time I actually came accross some. I have a small jar full now. We learn to live with that especially during the sanction years, afterwards people were too busy consuming and becoming materialistic in their outlook. But now when prices have become astronomical due to inflation and our extreme hurry to catch up with capitalism many are wondering where are those elusive coins?
In my quest for the Libyan coins I saved an article from the Oea newspaper of November 8th 2008, issue no. 068 : " who is responsible for the non-circulation of coins? where have the coins that the Central Bank of Libya issued disappeared? Is it true that they are smuggled out of the country to be recycled? Is there a mafia that melts the coins to make sewage covers?".



The author confirms that at least one old man he knew had started throwing the coins in the rubbish as too heavy too carry around especially since they are useless with the spike in prices. Also the merchants have been hoarding those coins for decades as this is to their benefit, and yes a 'mafia' was busted smuggling coins because the alloy could be smolten into other useful things or sold as scrap metal and they would still make loads of money.

Once again this is a vicious circle, sometimes you don't notice things and when one does its quite late in the day.

For sure though that the following is true :


(1) The Central Bank of Libya (CBL) has been taking steps for some time now to combat this shortage by putting new coins into circulation at regular intervals. We've seen from the Wiki article above referenced that at least till 2004 some new coins have been punched out. Moreover, the CBL's website has a link to money issued and money taken out of circulation, and one of the sublinks refers specifically to coins. See the photo below, courtesy of CBL. We can see that there are 8 denominations ranging from 50 Dirhams to 1 Dirham and all are valid!



(2) The merchants have been exponentially increasing prices following anticipated pay rises and that means for sure that they have been hoarding coins for a long time.


The lack of coins actually hurts our economy because it affects:
(a) salaries
(b) purchasing power
(c) accounting
(d) it wastes public money

So it's definitely a combination of circumstances but I can't believe that as stated at the beginning of my post that we are so irresponsible as to throw money or are simply lazy.

For the last 3 months or so it has become very very common to get change in coins at least in 25 and 50 denominations which I'm always happy to accept and use, I've been surprised with a few 5 Dirhams as well in some government offices. Basically there is an effort and the supermarkets cashiers are full of shiny gold coloured coins. Hopefully this a good sign !