On August 16, The South China Morning Post reported on the expansion of the RMB's influence in Africa, stating that the Libyan Bank would be connected to the Cross-Border Payment System (CIPS) and could potentially enter the Chinese capital market by issuing Panda bonds.
This arrangement did not arise suddenly. On July 16th, Naji Issa, the Governor of the Central Bank of Libya, met with Pan Gongsheng, the Governor of the People's Bank of China, in Beijing. According to information disclosed by the Libyan National News Agency, both parties officially agreed to encourage Libyan commercial banks to join CIPS and allow Libyan funds to enter the Chinese bond market. The first China-Libya Banking Forum is also scheduled to be held in 2027.
It should be noted that the current official statement from Libya is 'entering the Chinese bond market to diversify the investment portfolio', and the details regarding the issuer, scale, and timeline for issuing panda bonds have not been announced. Therefore, the integration with CIPS has entered the advancement stage, while the issuance of panda bonds remains a possible next step.
Libya choosing the Renminbi is primarily due to the existing real and substantial payment needs between Libya and China.
China is one of Libya's largest sources of imports. In 2024, China exported approximately $3.59 billion to Libya, involving machinery and equipment, automobiles, electronic products, and building materials. In the past, these transactions often involved US dollar accounts and multiple layers of proxy banks. For Libya, where the financial system is fragmented and the foreign exchange black market is active, slow transfers, high costs, and difficulties in issuing letters of credit are not minor problems.
After connecting to CIPS, Libyan importers can now pay Chinese suppliers in Renminbi more directly. Both parties have also proposed to allow direct remittances for small businesses and to enable the issuance of letters of credit through the Bank of China. The Libyan Central Bank stated that this will help reduce dependence on parallel foreign exchange markets and improve anti-money laundering compliance.
Secondly, what Libya truly lacks is not oil, but stable and sustainable reconstruction funds.
This country has one of the largest oil reserves in Africa, but since 2011, political divisions, armed conflicts, and port blockades have repeatedly disrupted oil exports. Data from the World Bank shows that oil and natural gas have long been responsible for more than 60% of Libya's economic output and most of its fiscal revenue. Once oil prices fall or oil fields cease production, the government's ability to invest quickly diminishes.
Meanwhile, the backlog of reconstruction bills continues to grow. The needs for recovery and reconstruction due to the eastern floods in 2023 alone have been estimated by the World Bank, the United Nations, and the European Union at $1.8 billion. The affected population accounts for approximately 22% of the country’s total population. This does not include the shortages in roads, power grids, housing, and public services caused by years of war.
US dollar financing is not completely unavailable, but US interest rates are high. Additionally, Libya’s own political risks will be factored into the high risk premium. Panda bonds offer another option: raising funds in Chinese yuan within China, and then using those funds to purchase Chinese equipment, building materials, and engineering services, thereby reducing exchange rate costs and currency mismatches.
This path has already been set by Africa as a precedent. Egypt issued 3.5 billion yuan in sustainable development bonds in 2023, and the African Export Bank also issued 2.2 billion yuan in bonds in 2025. In the first half of 2026, the total issuance volume of bonds in this market reached approximately 160 billion yuan, a year-on-year increase of 68%. However, the low interest rates of the RMB do not mean that Libya can automatically obtain low-cost funds. Its credit risk, political division, and debt repayment arrangements will still determine the final price.
The more realistic obstacles stem from within Libya. The Governor of the Central Bank, Isa, who had spearheaded this cooperation, submitted his resignation on August 9th, and Libya's political power structures between east and west have remained locked in a struggle over control of central bank operations and oil revenues - a dispute that has never truly ended. This means there are still long bureaucratic approval processes and political negotiations to be navigated from reaching an agreement to the actual bank’s access to CIPS, and potentially issuing panda bonds.
Therefore, Libya's choice is not actually 'abandoning the US dollar'. It seems more like adding an additional payment and financing channel outside of the US dollar system: first using the RMB to purchase Chinese goods, then holding RMB assets, and finally trying to raise funds from the Chinese market.
The real breakthrough for the internationalization of the Renminbi in Africa may not be the grand slogan of "de-dollarizing", but a very practical issue—when the dollar-based channels become more expensive and slower, is there another path to take?
