Libya’s Central Bank in Tripoli and foreign diplomats have condemned the latest move by the rival Central Bank management in the east, which on Wednesday received a batch of new Libyan banknotes printed without the approval of the Tripoli authorities.
Libya is suffering from a severe liquidity crisis with many banks limiting cash withdrawals or closing their doors to customers. But while many Libyans welcome the arrival of fresh bank notes to alleviate the crisis, the move is said to undermine the authority of the Tripoli CBL, which last month accepted to work under the Government of National Accord, as well as recent attempts to merge the two rival CBL managements.
Ali al-Hibri, the governor of the Bayda-based CBL announced on Tuesday that 4 billion Libyan dinars in 20 and 50 notes had been printed in Russia and would be in circulation across Libya from Wednesday June 1. Following a meeting with commercial bank managers in Bayda Al-Hibri told Iqtisadia Channel that there was no risk of there being two parallel currencies because the new bank notes were exactly the same as the old ones.
But as the samples published by the Bayda CBL show, the new notes do differ from the previous ones printed in the UK. Most importantly, the new notes bear Al-Hibri’s signature while the old notes bear that of Tripoli CBL Governor Al-Sadiq al-Kabir.
There have been reports that banks and businesses in western Libya would not accept the new banknotes, although the head of the eastern CBL’s Liquidity Crisis Committee Ramzi al-Agha reassured Libyans that the money would be distributed and accepted in the whole of Libya.
Reacting to the disclosure, the US administration declared that it concurred with the GNA Presidency Council in saying that the new currency was “counterfeit” and could “undermine confidence in Libya’s currency and the CBL’s ability to manage monetary policy”.
A statement issued by the US Embassy to Libya on Wednesday said that the Presidency Council informed the US of Al-Hibri’s deal with the Russian firm two days earlier. The US statement recalled the conclusions of the Vienna meeting on May 16 which said that Libya’s national economic institutions, including the Central Bank, the National Oil Corporation and the Libyan Investment Authority must be under the “sole stewardship” of the GNA.
The US also expressed concern at plans by “certain parties” to “drill into CBL safes”. This refers to efforts by the eastern CBL to recover the content of a safe stored in Bayda: USD184 million worth of silver and gold coins minted in 1979 that Gaddafi would use as presents. The code for the safe is in Tripoli and the CBL there refuses to hand it over.
US Special Envoy to Libya Jonathan Winer tweeted “GNA advised US & others printing & use of Gonzak [sic.] firm’s dinars not authorised by GNA or CBL & they should be treated as counterfeits”, referring to Goznak, the Russian state-owned company that printed the banknotes. Normally Libyan currency is manufactured by British company De La Rue.
The eastern CBL and the Interim Government in Bayda have reacted angrily to the US comments. Interim Government spokesman Hatem al-Areibi insisted that the new banknotes were not counterfeit and that it was the CBL in Bayda that defined the validity of the currency.
In a statement issued Wednesday (#9 of 2016) the eastern CBL condemned the US Embassy statement and labeled it “blatant interference in Libya’s internal affairs”. The eastern CBL expressed its surprise at the GNA Presidency Council’s objections to the new banknotes claiming that the latter previously agreed to the issuing of currency from both Tripoli and Bayda. It also argued that Ali al-Hibri was still the official CBL Governor, invoking a letter by the Presidency Council that addressed Al-Hibri as such.
Following a board meeting in Tripoli on Thursday, the CBL expressed its “severe disapproval” with the eastern CBL’s decision, accusing it of “reversing truths” and “taking advantage of people’s need” for the sake of “selfish interests” that will have “dangerous repercussions” on the national economy. In its statement the Tripoli CBL argued that the eastern CBL had drawn the wrong conclusions from the joint meetings, whose aim had been to unify the rival institutions.
This latest row shows the limitations of efforts to overcome the divisions in Libya’s sovereign institutions, despite the apparent consensus reached during a series of meetings between the rival CBL managements and the GNA that took place in Tripoli and Tunis in mid-May.