The first half of 2025 witnessed unprecedented turbulence in global currency markets. The Venezuelan bolívar plunged by more than 50% since the beginning of the year, becoming the clearest example of currency collapse. Following it came the South Sudanese pound, the Argentine peso, and the Turkish lira. The Libyan dinar was not spared from pressures either, losing around 9% of its value during the same period.
But the critical question here remains: How can the Venezuelan bolívar collapse so quickly, despite Venezuela holding the largest proven oil reserves in the world? And does this collapse hold lessons that could help Libya protect its own currency from a similar fate?
In this article, we will travel to Venezuela to dissect the main reasons behind the collapse of its currency, compare them with Libya’s current economic reality, and explore what this experience might mean for us amid today’s volatile environment.
Caracas, Venezuela: From Oil to Hyperinflation
On January 1, 2025, it took 52 bolívars to buy one U.S. dollar. By June 27 of the same year, the figure had doubled to 106 bolívars. This rapid collapse was not simply a natural fluctuation in the market, but rather the manifestation of a much deeper economic crisis.
Economists now predict inflation could reach 530% by the end of the year, leaving ordinary Venezuelans trapped between soaring prices and collapsing wages. The question is stark: How can a country with the world’s largest oil reserves fall into such a devastating currency crisis?
An Economy Held Hostage by Oil
Venezuela’s economy is almost entirely dependent on oil. Revenues from oil and gas account for 90–95% of total exports, covering about two-thirds of the state budget. This means any changes in global oil prices directly impact both the economy and the currency.
To cover the remaining third of the budget, the government turned to non-oil activities, imposing taxes on the private sector, levies on companies, and consumption taxes. Yet these revenues were never enough. The government was forced to borrow internally and externally. Worst of all, it relied on monetary financing—printing money to cover deficits—which drove inflation to record highs.
As a result, annual inflation reached 229% in April 2025, with projections of 530% by year’s end. Daily life has become unbearable for ordinary citizens. Prices of basic goods doubled in shocking fashion: the cost of one kilogram of beef jumped from $4 to nearly $8 in just a few months. Wages have been devastated; public employees report that their real salaries have lost nearly 70% of their value since the start of the year.
What Can We Learn from the Bolívar?
The Venezuelan story makes one truth abundantly clear: natural resource wealth—even vast oil reserves—is not enough to safeguard a currency or guarantee economic stability. The absence of diversification, weak institutional trust, and reckless monetary policies pushed the bolívar to the brink of total collapse.
Libya may not be experiencing Venezuela’s exact crisis, especially as Venezuela is weighed down by harsh U.S. and European sanctions. However, similarities in economic structure demand caution.
The United States imposed successive sanctions on Venezuela, beginning with its designation as “non-cooperative in combating terrorism and narcotics,” later targeting high-ranking officials accused of corruption and human rights abuses. By August 2017, President Donald Trump’s administration had enacted sweeping economic sanctions, cutting Venezuela off from international capital markets and banning the purchase of new government and PDVSA bonds.
In January 2019 came the most severe blow: direct sanctions on PDVSA itself, barring American companies from buying Venezuelan oil—crippling an economy almost entirely dependent on the U.S. market. By 2020, sanctions expanded further to freeze government assets, block financial dealings, and impose travel bans on senior officials.
Libya: A Fragile Similarity Despite the Differences
While Libya is not yet facing a crisis as severe as Venezuela’s, it shares critical vulnerabilities. According to the World Bank, oil represents over 95% of Libya’s state revenues and about 60% of GDP. Any decline in oil prices or disruption in production—from political turmoil to port closures—immediately hits the budget and the currency. In addition, Libya ranked sixth among the most corrupt countries in the world in 2024 (CPI = 13), while Venezuela ranked third (CPI = 10), according to Transparency International’s index. A significant portion of this corruption is attributed to the mismanagement of oil revenues and currency, where currency controls and smuggling have deepened economic crises and worsened living conditions.
Compounding the problem is Libya’s political division, which undermines the stability of the dinar. The existence of fragmented financial and monetary institutions weakens trust and creates inconsistent economic policies. With no strong non-oil alternatives, Libya is forced to rely on foreign reserves or even monetary financing (printing money) to plug budget gaps, threatening the long-term stability of the dinar.
In July 2024, the Central Bank of Libya reported that annual inflation stood at 1.8%. The IMF projects consumer price inflation of around 2.3% in 2025. While these rates are far from Venezuela’s hyperinflation, Libya remains highly exposed to rising import costs and the parallel exchange rate market.
Key Differences Between Libya and Venezuela
Libya’s economy is much smaller than Venezuela’s, meaning shocks are felt faster and more sharply. Yet unlike Venezuela, Libya is not under suffocating international sanctions, allowing it better access to global markets. The Libyan dinar has lost around 9% in the first half of 2025, but it has not yet entered the death spiral seen with the bolívar.
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Lessons for Libya from Venezuela’s Experience
The Venezuelan crisis highlights one unshakable lesson: relying on oil alone is a recipe for fragility. Diversifying income sources is no longer optional; it is a necessity. Investment in agriculture, tourism, and renewable energy could provide a safety net against oil shocks.
At the same time, transparent monetary policy is vital for building trust. Withholding data or printing money without backing will inevitably destroy confidence. Unifying the Central Bank of Libya and ensuring its transparency must be treated as a national priority.
On the political front, continued division only deepens the economic crisis. True economic reform cannot be achieved without unified institutions and restored stability.
Finally, smart management of reserves is crucial. Rather than depleting them, Libya should strategically use reserves to attract investment and build a more diversified, resilient economy.
Conclusion: The Libyan Dinar—Can It Escape the Bolívar’s Curse?
Venezuela shows us that oil wealth alone cannot shield a currency or secure lasting economic stability. While Libya’s circumstances differ, the risks are strikingly similar. Unless Libya acts decisively to reform its economy, diversify its revenues, and restore institutional trust, the dinar—though not yet in the bolívar’s dire state—may one day face the same fate.
Reviewed and Edited by: Dr. Abdelmajid Ben Dalla – Ahmed Siala
