By Libya Herald reporters.
Tripoli, 23 April 2017:
The governor of Central Bank of Libya (CBL) Saddek Elkaber said that the main reasons behind Libya’s economic crisis were insecurity, political division, low oil production, and the absence of (effective) governments since 2011.
Elkaber was accompanied by a number of members of the CBL board of directors and economic experts as he presented an 8-page press statement.
There has been much build-up and anticipation to the Governor’s press conference, which he had signalled last week with another press release. However, despite its length, today’s press conference held at the Tripoli CBL offered no new solutions.
The “Decrease of oil revenues from US$ 53.3 billion in 2012 to US$ 4.8 billion in 2016, down 91%. This situation has reflected in the low revenues in the public budget-funded income which decreased from LD 70 billion to LD 8.6 billion, which negatively affected the purchasing power of the dinar and the black market.”, he explained.
“There has been a steady decline in national income rates, especially in recent years of 2013-2014-2015-2016 due to the arbitrary closure of oil production and export, where losses exceeded 160 billion U.S dollar. This has also reflected negatively on foreign exchange reserves, weakening the value of the dinar and increasing the value of foreign currencies in the black market.”, Kaber added.
“The forced and unreasonable increase in public expenditure of a consumptive nature, especially the salaries. There is no a state in the world except Libya that spends more than 60 percent on salaries in the public budget.”, he complained.
“The investment (projects/development) part of the budget in 2010 represented 51% of the budget.”, he contrasted.
There has been an “absence of ministries, authorities, and administrations within the general administration of the state since 2012 including the ministry of economy and department of customs.”, he added
There has been ”chaos in the establishment of private commercial units led to the presence of hundreds of companies floundering on the request for currency and credits .There has been great pressure on the CBL and commercial banks..these companies represent about 60 percent of the black economy.”
Elkaber also noted that “Large depositors withdrew their funds and are hoarding and recycling them outside the banking system, to the amount of LD 30 billion. This exceeded 70 percent of GDP whereas it did not exceed 9% at the end of 2010. This has created a liquidity crisis that could not be solved by printing more money.”, he explained
“Inflation of the public debt reached unprecedented levels until the end of the first quarter of 2017 amounting to LD 66 billion [this amount of money does not include what was spent by the CBL in Bayda].”
“The CBL was able to reduce the deficit in the balance of payments to US$ 7 billion in 2016 compared to a deficit of US$ 12 billion in 2015 and 22 billion in 2014.”
“The cessation of the natural and positive role of the banking system in the general economy and the decline in credit, financing and investment – are due to the political division, lawlessness, chaos of legislation, the continuation of the closure of Civil Registration Authority.”
“The CBL has submitted files to the Attorney General related to money smuggling of more than LD 4 billion Libyan dinars…that has led to the spread of the black market – negatively impacted the value of the dinar.”
“The increase in out of budget expenditure and financial arrangements by the CBL in Bayda where it has reached- according to some reports- about LD 15 billion in 2015-2016.”
“Foreign currency can not be sold in cash as its supply to Libya has been suspended since December 2013 after the robbery of a shipment to the CBL Sirte branch.”, Kaber repeated.
However, Kaber repeated his long standing and oft-repeated solutions. “The solutions are still possible and need to a strong desire; the end of political division, formation of a united executive and political power, unity of divided institutions, security and activation of judicial authority, an end of armed conflicts, and increase of production and oil and gas exports to their level in 2010.”
“There has not been an effective government since 2011 till this day… and I mean a government to be in the right place.”, he concluded.
Analysts were disappointed by ElKaber’s press conference, expecting some kind of breakthrough. Kaber steadfastly refuses to devalue the Libyan dinar – in total opposition to what the Serraj GNA wants. He insists on a prerequisite package of measures being taken by the weak executive.
It is not clear what will happen next. The House of Representatives has been trying – unsuccessfully – to replace Elkaber – but seem to have no leverage to replace him. Elkaber seems to have become a law-unto-himself, effectively, accountable to no one. The fear is that the Libyan Dinar will lose even more value and lead to a total collapse of the Libyan economy – with the ensuing political and social consequences.
