Cash crisis wracks Libya, signals slide towards economic collapse
WHEN the doors of a Tripoli bank open, hundreds of frantic customers surge forward, desperate for money they have been waiting weeks or months to withdraw.
The scene, now commonplace, is a stark sign of Libya’s slide towards economic collapse despite oil wealth, and a UN-backed government’s lack of headway towards ending years of political turmoil and armed conflict that have splintered the country.
Over the past week, frustration has spilled over into renewed street unrest and a public spat between Prime Minister Fayez al-Sarraj and central bank governor Sadiq al-Kabir over who is to blame for acute cash shortages.
The dispute shows the UN backed Government of National Accord (GNA) struggling to control Libya’s finances even after a recovery in oil production raised the prospect of economic pressures easing.
A meeting convened by Britain and the US in London today is seen as a last-ditch effort to get Sarraj and Kabir to work together and save Libya’s economy from deeper failure.
The GNA cautiously started trying to establish itself in Tripoli in March, three months after its creation under a UN-brokered power-sharing deal and five years after the uprising that ousted Muammar Gaddafi, but sowed nationwide anarchy.
But the GNA has been unable to win backing from leadership rivals in the east or tame western Libya’s powerful armed factions. The worsening cash crisis and spiralling inflation quickly eroded hopes that the GNA could bring stability.
Some Libyans now queue overnight to collect wages and benefits. “I have not been paid my salary for almost four months,” Milad Lahmar, a physiotherapist and father of four, said outside Tripoli’s Al-Tijari Al-Watani bank.
Empty coffers
Wahda Bank, one of the country’s largest, said yesterday that its coffers would be empty until further notice.
The Libyan economy is almost entirely dependent on oil revenues, so solid GNA relations with the National Oil Corporation (NOC) and the central bank, which processes all NOC earnings, are crucial to coherent governance and policy-making.
The NOC and the central bank both fractured when rival governments and parliaments arose in Tripoli and eastern Libya in 2014. The Tripoli branches, which have retained control over payments, pledged to work with the GNA’s leadership, known as the Presidential Council. But relations between Sarraj and Kabir have soured amid a political deadlock.
The eastern parliament, or House of Representatives (HoR), has blocked approval of GNA cabinets, and the finance minister has never taken up his post. The mostly powerless rival government appointed by the HoR, and its central bank governor, have limped on in Libya’s distant east.
Kabir’s mandate expired in late September, but he remains in the job by default because the HoR would have to approve any replacement under the UN-brokered deal.