Libya’s dried-up banks: The daily struggle for cash

Across Libya, thousands of people queue daily at bank branches, with lines often spilling onto streets and worsening congestion in already jammed capital roads. This is not a temporary disruption but a deepening cash crisis reshaping daily life, where physical money is scarce. Citizens remain trapped in a banking system dominated by outdated, poorly managed government-owned institutions.

The current cash crisis is not new. Long queues outside banks have repeatedly appeared over the past decade as families and businesses struggle to access liquidity. In 2018, a dispute between rival authorities over the Central Bank triggered severe banknote scarcity, forcing citizens to rely on unofficial channels. The problem resurfaced in 2024 amid institutional divides and tighter withdrawal policies. These shortages have done more than inconvenience to savers and wage earners — they have produced a predatory cash economy that thrives on scarcity, with ordinary consumers among its biggest victims. When Libyans cannot convert their checks into physical dinars, they are forced into the hands of cash brokers who monetise access to liquidity. These intermediaries exchange banking instruments for cash only at steep discounts, effectively taxing people for access to their own money.

Small shopkeepers and ordinary traders are not the beneficiaries of this system either but its captives, compelled to accept discounted checks or inflated prices simply to stay afloat. Consumers, too, are forced to navigate these informal markets merely to buy essentials or top up prepaid services, undermining purchasing power and amplifying everyday hardship. The real winners are those who control cash flows — well-connected brokers, bank insiders, and networks shielded by political or armed power — who profit from scarcity rather than serving the economy.

Libya’s banking sector has in recent years been rocked by waves of corruption cases that underscore deep internal weaknesses and eroded confidence in financial institutions. In 2025 alone, dozens of bank employees and officials were investigated, charged, or convicted of financial corruption, including embezzlement, fraud, illicit lending, and forgery across major banks including Gumhouria and Sahara Banks—two of the major ones. In multiple high-profile cases, staff were sentenced to multi-year prison terms and ordered to repay funds misappropriated through illegal loans and fraudulent transactions, while prosecutors have pursued corruption charges in branches nationwide. These recurring scandals have compounded mistrust, reinforcing liquidity hoarding and underscoring how weak governance within banks fuels both scarcity and exploitation.

What appears at street level as a stubborn refusal by small shops to accept electronic payments is, in reality, the final link in a chain of coercion driven by cash scarcity. Across Libyan cities, corner shops now routinely insist on physical dinars even for the smallest transactions — phone credit top-ups, cigarettes, or basic groceries — effectively reversing years of gradual adoption of electronic payments. 

This is not a cultural backlash against digital finance, nor a preference for informality. Shop owners themselves are being forced into cash-only practices because their own suppliers and wholesalers increasingly demand to be paid in banknotes. As one corner shop owner explained when asked why he refused a bank card payment for a 20-dinar phone credit top-up: “We are required to pay the big ones in cash.” In a system where access to liquidity is uneven those at the bottom have no leverage. The pressure cascades downward. Large importers, distributors, and protected intermediaries — the “big cats” of Libya’s distorted economy — can demand cash because they control supply chains and enjoy privileged access to liquidity. Small retailers, lacking such protection, must comply or risk being cut off. Consumers, in turn, are forced to shoulder the burden, hunting for cash or paying premiums to obtain it, even for everyday necessities.

What emerges is not merely a shortage of banknotes but a cash hierarchy, where power determines who can operate electronically and who cannot. Electronic payment systems exist, but in an economy dominated by scarcity and protection, they function selectively, reinforcing inequality rather than easing transactions.

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Beyond diversion and mistrust, Libya’s cash crisis is worsened by a severe shortage of functioning cash-distribution infrastructure. Even by conservative estimates, the country has only 300–450 ATMs nationwide — extremely low for a cash-driven economy. In Tripoli alone, with over a million residents, this means one machine for tens of thousands, assuming they work at all.

The problem is not just the number of machines but their limited availability. ATMs are often stocked only after branches close, while others remain empty for days or dispense minimal amounts, forcing depositors into long queues or informal markets. Scarcity here is structurally destabilising: ATMs are essential distribution points, and when too few or poorly supplied, cash becomes a bottleneck regardless of account balances.

This dysfunction reinforces a wider pattern. Large traders, importers, and ordinary people, distrustful of banks, compete aggressively for available cash. The system privileges those with leverage and information, deepening inequality and accelerating the cycle of withdrawal, hoarding, and scarcity.

Libya’s cash crisis is sustained not by confusion over its causes but by the lack of accountability for those who benefit. The system rewards actors with preferential access to liquidity, who operate outside normal banking rules or impose cash-only terms on weaker counterparts. These actors have little incentive to support reforms that would expand access or restore confidence.

Often described as temporary, the crisis is neither temporary nor accidental. It reflects a system where money circulates freely for some but remains inaccessible to most. In a resource-rich country, scarcity is not natural but manufactured through policy choices, weak oversight, and tolerated abuse.

The Central Bank, while formally responsible for monetary stability, has presided over a system where restrictions apply unevenly and transparency remains limited. By tolerating privileged access to cash while ordinary depositors face withdrawal caps and empty ATMs, monetary authorities have allowed scarcity to become a tool of power. In this environment, liquidity is not merely money; it is leverage — used to discipline smaller businesses, shape supply chains, and entrench economic hierarchies.

Since October 2024, when Naji Issa became governor, the Central Bank has pursued a series of reforms aimed at modernising the banking sector and reducing reliance on cash. These include expanding electronic payment infrastructure and services, increasing the number of POS terminals nationwide, waiving fees for merchants to acquire and operate these machines, reducing card transaction costs, and launching a National Financial Inclusion Strategy for 2025–29. Issa has also overseen the release of fresh liquidity to banks in an effort to ease physical cash shortages. While these steps represent important institutional shifts, they have yet to resolve the structural issues that allow scarcity to be weaponised.

For ordinary Libyans, the cost is paid daily — in queues outside banks, inflated prices, discounted wages, and the indignity of being denied access to their own earnings. Until cash is treated as a public utility rather than a privilege, and access to liquidity is governed by rules rather than connections, the crisis will persist — not because Libya lacks money, but because it lacks a system willing to distribute it fairly.

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