TRIPOLI / BENGHAZI – Libya must reunify its fragmented economy and public finances if it has any hope of ending a decade of violent divisions, but progress towards this goal is slow.
Businesses and ordinary people alike struggle to perform basic financial transactions, pointing to the lingering dysfunction while showing that peace measures have failed to stop rival factions competing for control of economic levers.
âThe evil has reached everyone. Today money cannot be transferred from two accounts in two different banks within 100 meters of Tripoli on the same street. There is no justification for us to be like this, âsaid Husni Bey, a prominent businessman.
Central Bank of Libya (CBL) Governor Saddek Elkaber on Thursday joined UN-backed online talks with the head of his rival eastern-based branch to discuss reunification of the corps, although that such approaches, although theoretical for more than a year, are still at an early stage.
The stumbles, visible in budget disputes and the lack of offsets between eastern and western banks, reflect political maneuvering at a time of potential change.
Libya has been in chaos since the 2011 NATO-backed uprising that overthrew Muammar Gaddafi, with control of different parts of the state being challenged through political and military means among a range of local forces.
In March, an interim unity government was approved by the main eastern and western factions that have been fighting since 2014, with the aim of holding national elections in December, measures considered the best hope for peace in years.
However, these advancements are now widely seen as stalled as powerful figures attempt to prevent any loss of leverage or seek to reposition themselves for a new waiver.
Reuniting central banks
Over the past seven years, a parallel administration has emerged in the east with its own central bank, a rival oil company chief and other state institutions, claiming the legitimacy of the Tobruk-based parliament that was elected in 2014.
This raised crucial questions about the responsibility for spending on each side and how the debt incurred by the eastern bank, and used to finance a war against Tripoli and pay the salaries of the eastern-based forces, would be absorbed into. national accounts.
Acting Prime Minister Abdulhamid Dbeibeh was mandated to prepare for elections, unify divided state institutions and improve services, but made little progress.
Parliament has repeatedly rejected its budget proposals and different parts of the many political bodies created in recent years have quarreled over the leadership of major institutions, including the national oil company and the central bank.
Meanwhile, Dbeibeh continued to spend money, including on heavily overstaffed public sector salaries, using existing emergency measures.
The reunification of the CBL would be the key objective of any effort to end economic divisions. CBL’s Tripoli-based branch is the internationally recognized branch and cut eastern banks off most clearing operations in 2014.
Businesses in the east or west are now avoiding using banks based on the other side “so that their financial transactions can be done easily,” said Alaref Algajiji, chief executive of a Libyan business council .
Last December, as the peace process progressed, the CBL held a plenary meeting of its governors for the first time in years to agree on a new unified exchange rate involving a devaluation of the currency.
The move helped ease a liquidity crisis and was seen as a precursor to the reunification of central banks and the re-establishment of clearing operations between Tripoli and the eastern commercial banks.
A financial study commissioned from Deloitte as part of the UN-backed peace campaign was completed in July using data provided by branches of the rival central bank, but without conducting an independent audit of the one or the other.
He established a roadmap to reunite them, which each governor said he was following.
Tripoli-based CBL governor Elkaber said in written responses to questions that he was “starting to take practical steps” towards reunification.
He said the CBL was working with the presidential council, the unity government, the UN mission in Libya and the attorney general’s office to agree on a roadmap.
Jalel Harchaoui of the Global Initiative against Transnational Organized Crime said it was politically preferable for Elkaber to move slowly, and that he might also worry about how Eastern forces would use renewed access to national banks.
Eastern CBL Governor Ali al-Hebri, who before the split was Elkaber’s deputy, said the lack of compensation for eastern banks was “an economic crime”, but added that he too was preparing for reunification through the process described by Deloitte.
However, he disputed the figures Elkaber gave for public debt levels and accused him of using political arguments to circumvent the reunification process. He also said the unity government’s budget proposals were too high and went against agreements reached last year to unify the exchange rate.
“It is a major crime in the history of Libya,” he said.