The liquidity crisis continues to impact living standards despite the recent efforts by the Central Bank and the Presidency Council to implement economic reforms. A group of citizens protested in front of a branch of Al-Jumhouriya Bank in Tripoli on 14 August, demanding the money that they had deposited in the bank and expressing their frustration about the withdrawal limits and the long queues for cash. Women led a demonstration for the first time in front of a bank in Janzour on 15 August over the lack of available cash before Eid al-Ahda which will take place between on 20-24 August.
Under this public pressure, the Central Bank and Presidency Council have once again tried to implement difficult reforms despite personal differences between the embattled bank governor Sadiq el-Kabir and Presidency Council head Fayez Serraj. Representatives from the Presidency Council, Central Bank, and the High State Council (HSC) were expected to hold a meeting on 20 August to discuss the implementation of these reforms.
They are also experiencing increased pressure to implement the reforms from the international community. Former US Chargé d’Affaires and current Deputy UN Special Envoy Stephanie Williams has been very involved in pushing stakeholders to hold such meetings. She later announced that she would be recruiting economists to join the UN Support Mission in Libya (UNSMIL) specifically in order to help accelerate this economic agenda.
The Central Bank also announced the launch of an initiative to encourage people to use electronic payment methods instead of cash-based payments, without raising the prices of goods or services. Under the new plan, the bank will reimburse 50% of merchants’ electronic sales in cash if people use their bank cards. To promote this initiative, the Central Bank is pressing the commercial banks to accelerate the issuance of local cards and expand the number of merchants that accept transactions across the country.
Another element of imminent economic reform is very likely to be the devaluation of the Libyan Dinar. The GNA’s finance minister, Osama Hammad, announced that the government planned to gradually devalue it from the official rate of LD1.38 to the US$ to LD4.5 to the US$. The HSC head, Khaled Mishri, confirmed this report on 16 August. The black market rate has pushed the unofficial and more commonly used rate to roughly LD5-LD6 to the US$ for over one year and it reached LD10 at one point. The goal of devaluing the currency is to increase the purchasing power of ordinary Libyans and also make it less attractive for corrupt politicians and militia leaders to acquire Letters of Credit (LoCs) to take advantage of the disparity between the official and unofficial rates for personal gain.
The ability of the Central Bank and GNA to implement these reforms is, however, hampered by el-Kabir’s controversial position as governor. Many institutions in the east and west have sought to pressure the GNA to finally dismiss him and the House voted to install his replacement, Mohamed al-Shukri, in January 2018. Former Libyan Ambassador to the UAE, Aref Nayed, has also resumed his own campaign against el-Kabir by calling for an investigation into the Central Bank’s dealings with Turkish commercial banks. It allegedly funnelled money to Syrian rebels through Turkish bank accounts starting in 2012, under el-Kabir’s leadership. He, however, has fiercely resisted the constant pressure to step down. The pressure and divisions undermine the Central Bank’s effectiveness. El-Kabir sought to unburden himself slightly last week by dismissing the Board of Directors of the state-owned Libyan Foreign Bank and referring them for investigation after they called for him to step down.