A crisis in the Libyan economy sparked by an escalating and sometimes violent contest over the control of the country’s central bank can only be cured through diplomacy, the US embassy in Libya has said, as it backed efforts by the UN to convene an emergency meeting of the groups involved.
The embassy, led by the ambassador Richard Norland, pleaded with all sides to heed a UN call to hold talks, saying the contest over the administration of the bank “undermines confidence in Libya’s economic and financial stability in the eyes of Libyan citizens and the international community, and increases the likelihood of harmful confrontation”.
The embassy added: “Reports of arbitrary arrest and intimidation of central bank employees are particularly concerning – those responsible must be held strictly accountable.”
There was no sign on Tuesday that the UN-backed institutions in the west of Libya, led by Abdul Hamid Dbeibah, were backing down over their dismissal of the bank’s governor of the past 20 years and installation of a new leadership.
The bank dominates the Libyan economy, owning the two main commercial banks as well as holding $27bn in reserves, most of it from oil revenues. Sadiq al-Kabir, the sacked governor, has recently started to attack Dbeibah’s overspending and is now seen to favour the forces in the country’s east.
Abdel Fattah Ghaffar, the new interim deputy governor appointed by the Tripoli-based government, held a press conference in the capital and insisted he could ease the current liquidity crisis, pay unpaid salaries within two days and be accountable to a board of governors.
He called on Kabir to hand over the secret codes that would make payments possible, revealing the extent to which the practical contest for control of the bank’s operations is in reality far from resolved.
Kabir has run the bank since 2011, the year that Col Muammar Gaddafi was toppled with western backing, leading to a paralysing split between the west and east of the country.
The rival eastern administration has opposed Kabir’s sacking and said on Tuesday it would continue with “suspending all oil production and exports until Kabir is reappointed”, citing “force majeure”. The oilfields affected constitute about 90% of the country’s oilfields and terminals.
The eastern-based administration linked its move to “repeated attacks on the leaders, employees and administrations of the central bank” and blamed “outlaw groups”.
Kabir said on Tuesday for a second day running the bank had been unable to operate due to threats from militia and the kidnapping of four staff, leading him to warn that August salaries may not be payable. His statement said the bank’s ability to send emails had been stopped illegally by those trying to overthrow the bank’s leadership.
Libya’s latest descent into chaos and fragmentation is part of a near decade-long contest over state resources within a divided Libyan political elite that has repeatedly shelved nationwide elections since 2014, fearing that democracy may lead them to lose privileged access to Libya’s massive oil revenues.
In recent months Kabir has become openly critical of the Tripoli-based government’s spending excesses, saying the profligacy was increasing pressure on the exchange rate and boosting inflation. Dbeibah has hit back, rejecting claims of resource mismanagement and corruption.
In an attempt to justify the dismissal of Kabir against the wishes of the US and European diplomats, the Libyan Presidential Council – linked to Dbeibah and headed by Mohamed al-Menfi – said it understood the concern but it believed the decision strengthened the rule of law and would lead to the appointment of a governor with integrity and competence.
It said it would also ensure that a board of directors is formed for the first time in many years, ending Kabir’s one-man show. Menfi said the council had the constitutional right to dismiss the governor, a widely contested claim that only underscores the extent to which Libya’s political institutions need renewal.
The man originally appointed as the replacement governor, Mohamed al-Shukri, has now refused to take on the role unless his appointment is also sanctioned by the eastern-based parliament, the House of Representatives.
He said: “My professional and career history and my ethics absolutely do not allow me to be part of this chaos. By God, a single drop of our children’s blood is more precious to me than all the spoils of the world and the jobs of the Libyan state. Oh God, I am innocent of what the oppressors are doing.”
The west, including the IMF, has had concerns about the central bank’s lack of accountability for years, but is opposed to the unilateral manner of Kabir’s removal, fearing that it will slow the process of unification. The British ambassador to Libya, Martin Longden, denounced “unilateral decisions that only destabilise the country” and stressed the UK’s “support for a solution through legal means and not exposing Libya’s financial situation internationally to danger”.
