Europe and US “concerned” at battle over Libya’s financial institutions

Libya Channel

The US, the UK and four other European countries have warned Libya’s rival factions to keep essential state bodies out of year-long conflict that is pulling the country apart, fearing interference could destabilize the state further.

In a joint statement released on Monday, leaders of France, Germany, Italy, Spain, Britain and America expressed their “concern” at attempts to divert Libyan resources to the “narrow benefit of any side in the conflict” saying it would “disrupt financial and economic institutions that belong to all Libyans.”

The statement specifically referred to the Central Bank of Libya, responsible for the country’s extensive oil revenues, saying it should “act in the long term interests of the Libyan people” until a national unity government is formed.

The statement came amidst claims that the CBL secretly transferred LYD50 million (US$36 m) to the General National Council, Libya’s former parliament that was resurrected by rival administration Libya Dawn after they took over Tripoli last summer.  This outraged supporters of the House of Representatives, the new parliament that has international recognition but de facto very little control over the state. Both sides accuse one another of wanting to plunder the country’s resources. The LYD50 million-claim has since been invalidated, but the scramble for Libya’s oil money continues.

When Libya’s political transition unravelled and political institutions split into rival factions in mid-2014, the CBL pledged to remain independent by releasing only public salaries and subsidies, while putting all other budget items on hold. Both the GNC and the HoR have since been working on limited budgets, using commercial bank loans and already allocated funds from the previous fiscal year.

Efforts to politicize the Central Bank began almost immediately. In mid-September 2014, the HoR, which had settled in Tobruk a month earlier, fired CBL governor al-Sadiq al-Kabir over a payment dispute and appointed his deputy, Ali al-Hibri, as caretaker governor. Al-Kabir had prevented al-Hibri from transferring an alleged LYD80 million (US$65m) from the account of the GNC to that of the HoR, arguing that power had not been legally passed on to the new legislature.

In January 2015, the HoR relocated the CBL’s Benghazi branch to in the eastern town of Bayda — also the temporary headquarters of the cabinet —after the bank was caught up in the fighting between the army and Islamist militants. Subsequently, it declared that the CBL would from now on be managed by al-Hibri from Bayda instead of Tripoli. Seeking international recognition, al-Hibri met with the US administration and international financial organisations in Washington in January, shortly after al-Kabir’s own visit to the US in December.

Having managed to rally a part of the CBL’s management board, al-Hibri confirmed al-Kabir’s dismissal with decision No. 14 of April 19, 2015, advising financial institutions not to deal with the former governor to “avoid any legal liability”.

Declarations from the east were largely ignored, given the centralized nature of the financial system and the fact that the CBL in Bayda does not have the practical means to redirect state funds. Oil export earnings, Libya’s by far greatest revenue, are still transferred to the CBL in Tripoli via the Libyan Foreign Bank, while the CBL in Bayda does not have its own sources of income.

But the internationally-recognized government is working hard to change this. In addition to the new CBL, it also set up a parallel National Oil Corporation — the body in charge of selling Libyan oil and gas, appointed its own Chairman and demanded that foreign oil companies stop dealing with the NOC in Tripoli. Hoping to divert oil export earning to the CBL in Bayda, prime minister Abdallah al-Thinni ordered the opening of bank accounts in the United Arab Emirates in early April and said accounts in Tripoli would be closed.

However, the core staff in Libya’s financial institutions appears to be remarkably resilient to political pressures. Although he recognizes the HoR as sole legitimate legislative body and thinks his former boss, al-Sadiq al-Kabir should accept his dismissal, Bayda CBL governor al-Hibri maintains that the CBL — even its Tripoli office — has not been drawn into the conflict.

In an hour-long interview with Libya Channel last Tuesday, al-Hibri denied the LYD50 million-claim, confirming an earlier denial by the Tripoli CBL. Al-Hibri said that al-Kabir had authorised this particular transfer before the HoR’s inauguration, at a time when the GNC still was the acting parliament, and that he had signed the order himself. “As far I as am aware of”, he said, “there have not been any illegal transfers”, adding that the bank barely had enough money to pay salaries and subsidies anyway. Al-Hibri also said he advised prime minister al-Thinni against the “futile measure” of opening bank accounts in the UAE as he was against the idea of splitting the CBL. So far, he claimed, no money has arrived on these accounts.

If the CBL has been relatively successful at remaining independent, it is also partly thanks to what appears to be a good collaboration with the Ministry of Finance in Tripoli. It is the latter that collects data from the remaining ministries and submits the list of entities and employees entitled to state salaries to the CBL. According to insiders, ministry of finance officials receive “calls from both sides” and do not act upon political considerations.

But the rival governments’ plans for the financial sector are all but clear. Al-Hibri said he wants not to supplant the Tripoli CBL but to turn the Bayda CBL into the “general administration” of the Central Bank, which will host the future board of governors. “We are currently building financial infrastructure and by the end of the month we will be equipped to carry out financial transactions”, he claimed in the TV interview. According to al-Hibri, this is not akin to a political move but to a structural reform, whereby the Central Bank will be the first major institution to be decentralized, with its headquarters in Bayda and branches in Tripoli and Sabha.

 

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