Libyan economy collapses during civil war

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A military vehicle of Libyan forces allied with the UN-backed government is parked in front of crumbling buildings on the eastern frontline of fighting with Islamic State militants, in the 650 neighborhood of Sirte, Libya on 21 October 2016. REUTERS / Ismail Zitouny

A military vehicle for Libyan forces allied with the UN-backed government is parked in front of ruined buildings on the eastern front line of fighting with Islamic State militants, in the Sirte 650 neighborhood

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John Kerry and Boris Johnson are holding crisis talks with Libyan leaders in London in an attempt to avert the collapse of the war-torn country’s economy.

The World Bank said the Libyan economy was on the brink of collapse as the civil war worsened and bank reserves collapsed.

In a US-led move, the US Secretary of State and UK Foreign Secretary, joined by the International Monetary Fund and the World Bank, planned to urge ailing Libyan PM Fayez al- Sarraj, to adopt drastic reforms.

The Libyan economy has atrophied and with declining oil exports, most of the population of 6 million depends on rapidly depleting foreign reserves.

A Western official said Sarraj would be asked to mend barriers with Libya’s Central Bank governor Saddek al-Kabir, who accused the prime minister of failing to formulate economic policy. “This clearly shows the gravity of the situation and the need for action,” the official said.

But some fear that the corrective action window may close. Six months after his arrival in Tripoli, Sarraj’s government of national understanding (GNA), appointed by a commission chaired by the UN, has failed to convince the population.

Sarraj’s administration is one of three vying for power. In Tripoli, he faces the self-proclaimed government of national salvation, who captured the Rixos government complex in an attempted coup two weeks ago.

A third government operates through the elected parliament in the eastern city of Tobruk. Forces there, led by the controversial General Khalifa Haftar, seized the country’s major oil ports last month, and although oil exports have since doubled, Tobruk controls most of the industry.

Libyan Prime Minister of the Government of National Unity Fayez Seraj addresses the United Nations General Assembly in the Manhattan neighborhood of New York, the United States, on September 22, 2016. REUTERS / Eduardo Munoz

Libyan Prime Minister of the Government of National Unity Seraj addresses the United Nations General Assembly in New York

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Last week, London defense analyst Jane’s reported that Tobruk’s hand had strengthened after its main ally, the United Arab Emirates, opened an air base to support ground troops in the east of Libya.

With the GNA unable to form its own security force, Tripoli is at the mercy of warring militias, with daily killings, kidnappings and exchanges of fire.

The GNA’s only success was a continued offensive by Allied militias, backed by US airstrikes, which destroyed most of the ISIS forces at their main base in Sirte.

But the government’s lack of authority has led to an upsurge in migrant smuggling, as the capital faces power cuts and inflation, with liquidity shortages causing riots in the few banks still open.

Nadia Ramadan, a resident of Tripoli, said: “Life is getting more and more difficult. We literally hear gunshots almost every night, there is no inflation of money and food. “

US officials are aware of the effect Libyan chaos can have on the hotly contested presidential election, with Hillary Clinton, as former secretary of state, overseeing the US bombing of Libya in 2011 which overthrew Muammar Gaddafi.

A Libyan flag flies at the entrance to Sirte, Libya, October 30, 2016. REUTERS / Hani Amara

Libyan flag flies at the entrance to Sirte

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Barack Obama said in April that the failure to follow up the intervention with support for Libya’s nascent democracy was his presidency’s worst mistake, and the administration is hoping to show progress is being made.

US envoy to Libya Jonathan Winer invoked the spirit of Benjamin Franklin by urging Libyans to unite, tweeting:

But some fear that with power contested by three rival governments and a rapidly disintegrating administration, economic reform may prove impossible.

“Several measures must be taken simultaneously, a high level of coordination is required, but confidence in the banking system has evaporated,” said Jalel Harchaoui, Libyan analyst at the University of Paris.



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