Libyan banking system nearing collapse

82

Libya’s banking system “will likely collapse” if the country’s parallel central bank branches do not unify and stalled political talks could unravel a ceasefire, the UN special envoy to the country warned.

Oil-rich Libya descended into chaos after the NATO-backed overthrow of leader Muammar Gaddafi in 2011. It has been divided since 2014 between an internationally recognised government in the west and a rival administration in the east with its own institutions.

The division of the central bank, combined with the lack of a unified budget, led to both branches racking up debt to finance their respective administrations, UN special envoy to Libya Jan Kubis told the UN Security Council.

“Managing this debt is only possible if the central bank unifies. In plain terms, Libya’s banking system will likely collapse, absent unification,” Kubis said.

An international audit of Libya’s parallel central bank branches recommended steps for eventual reunification. Kubis told the Security Council the main finding was unification “is no longer simply recommended but required”.

Reunification of the central bank is expected to improve confidence among buyers of Libyan oil at a time when prices of the country’s main export are rising.

Oil revenue flows through the Tripoli-based Central Bank, which pays salaries of many state employees across front lines. Libya’s oil exports were hit by a blockade by eastern-based forces last year, leading to lost revenues.

A UN-led peace process in Libya brought a ceasefire last year and then a unity government was formed. Talks this month aimed at paving the way for elections in Libya in late December stalled.

“I’m concerned although the ceasefire agreement continues to hold, notwithstanding minor clashes between armed groups and criminal gangs, the unity of the JMC (Joint Military Commission) and implementation of the agreement could unravel if the political process remains stalled,” Kubis said.

French Foreign Minister Jean-Yves Le Drian, who chaired the Security Council meeting, said elections must be held in December and foreign forces must leave Libya, a call echoed by council members.

“It is high time to implement a progressive, balanced and orderly timeframe for departure of foreign elements from both camps,” Le Drian told the 15-member council.

Diplomats said last month Turkey and Russia, which back opposing sides in Libya, reached an initial understanding on a step-by-step withdrawal of foreign fighters backed by them.

Libya’s new unity government Prime Minister Abdulhamid Dbeibah said the presence of foreign mercenaries “remains the biggest obstacle to stability in Libya.”