(Author: Libyan Gazette Editorial Staff)
The UN-backed Government of National Accord (GNA) is at risk of going bankrupt as Libya’s economy continues to stumble. Bankruptcy is likely to trigger widespread anger and frustration which would further jeopardize the credibility of the struggling unity government.
The Libyan dinar fell 7% in comparison to the US dollar this weekend and in the black market was trading for six dinars for one US dollar. The official currency conversion rate is 1.4 dinars to one US dollar.
The World Bank and leaders of powerful Western nations became involved in Libyan economic talks this month as politicians gathered along with technocrats to discuss the country’s economic situation. Meetings were held in Rome and London.
After the meetings, an announcement was made stating that a 2017 economic plan for Libya will be released by December 1. The details of the plan were not confirmed however there are speculations that it will likely include measures regarding support for the Libyan dinar and lifting of fuel subsidies.
There has been tension between the Libyan Central Bank Governor Saddek Al-Kabir, and Libyan Prime Minister Fayaz Al-Sarraj. Al-Kabir has rejected Sarraj’s demands which would allow the unity government access to emergency funds that are under the control of the Central Bank.
The Governor has also been skeptical of the Libyan government’s demands for funds due to its lack of economic planning especially considering the GNA did not have a finance minister until just last week.
Al-Kabir insists that the Libyan government should work on restoring oil exports, which bring in 95 percent of the government’s revenue, instead of relying on the emergency funds.
Sarraj on the other hand argues that a falling Libyan dinar is inevitable and that reducing the deficit should be a priority by increasing oil exports and ensuring that banks are provided with the necessary funds. Aware of the risks involved with his plan Sarraj realizes that prices of imports could rise and that he may not have the political capital needed to ensure the plan is executed fully.
The Central Bank was eventually forced into giving the GNA six billion dollars, in addition to funding the electricity credits and Libya’s state oil corporation, after receiving pressure from Western governments.
The foreign exchange reserves were over 100 billion dollars three years ago but are expected to drop to 43 billion dollars by the end of 2016.
Oil production has risen to 600,000 barrels per day, however, the lack of stability and security in Libya has jeopardized its goal of producing 1.1 million barrels of oil per day by next year.
Since 2011, GDP losses exceeded $200 billion making Libya the country that suffered the greatest economic hit following the uprisings in the region that have been referred to as the Arab Spring.
“Trying to get the economy to move more smoothly is an absolute requirement in terms of the credibility of this government,” said a western diplomat.
“He (Al-Sarraj) is a good man trying to do a very difficult job,” said a British source emphasizing Britain’s support for the Libyan government in Tripoli. “He is an architect thrust into one of the most difficult political jobs in the world.
“A fundamental obstacle in Libya is (that) there is very little sense of national identity. The concept of negotiating and compromising for the greater good of the country is not something that comes naturally to people. The majority of the Libyans want the GNA to work.”
The Central Bank has also argued that without the endorsement of the Libyan parliament based in Tobruk, it is technically illegal for the bank to provide the unity government with the funds they have requested.
Tension between the parliament and the GNA have been ongoing for months. The parliament will soon be voting on whether or not it will support the Tripoli government.