Egypt Pulse

Libya finance minister: Political divide blocking economic reform

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Article Summary
In an interview with Al-Monitor, GNA Finance Minister Osama Hamad discussed the impact of the political division on the economic situation in Libya.

Libyans have been suffering under difficult economic and living conditions due to the war-plagued, deteriorating economy and political divide between the Tripoli-based, internationally recognized Government of National Accord (GNA) and the Al-Bayda-based Libyan Interim Government. The political division has also resulted in a GNA-affiliated central bank in Tripoli, headed by Sadiq al-Kabir, who was appointed in 2011 by the Transitional National Council, and a central bank in Al-Bayda, headed by Mohammed al-Shukri, who was appointed by the Libyan House of Representatives.

Al-Monitor interviewed GNA Finance Minister Osama Hamad on April 24 about the impact of the political division on the economic situation in Libya and the nature of relations between the two Ministries of Finance. The interview, by phone, also touched on reconstruction plans. In February, the International Monetary Fund (IMF) announced that the cost of reconstruction will exceed $80 billion. Hamad explained that he has called for postponing plans for reconstruction until after the elections to be held this year because the project requires decisions that should be made by a government representing the will of all Libyans. He also spoke about the economic reform program the GNA set out in November 2017, noting that it requires a political will that is absent amid the dueling governments. As far as recovering debts owed to Libya by foreign governments, Hamad said his ministry has formed a committee to demand repayments of the much-needed funds, but the going is difficult.

Al-Monitor:  How does the presence of two governments in Libya and the armed conflict affect the economic situation?

Hamad:  The economic situation is directly affected by the degree of political and security stability. The multiple governments, as well as armed conflict, do indeed negatively affect the economic situation.

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Al-Monitor:  Is the Ministry of Finance in the Libyan Interim Government affecting your work as a GNA minister?

Hamad:  There is a high level of awareness and a sense of national responsibility among officials in both ministries. We have been trying hard to keep technical, financial work out of the political conflict, and we have already begun to take steps toward unifying financial institutions. These efforts have so far resulted in unifying the salaries of all [government] employees in the country into one system, and salaries were paid in January and February this year uniformly for all employees in the government sector.

Al-Monitor:  Prices are rising in Libya. What solutions can your ministry offer in dealing with this crisis?

Hamad:  Price increases are an inherent responsibility of the Ministry of Economy in terms of consumer protection. As a Ministry of Finance, we try hard to establish a comprehensive political, financial, monetary, commercial macroeconomic policy. Yet the political and security situation casts a shadow on the success of these efforts.

Al-Monitor:  What will happen to the economic reform program set up by the GNA following the formation of a committee of economic experts?

Hamad:  The economic reform program depends on whether there is a political will to make this program a success. Nevertheless, there is no such will, given the ongoing political divide.

Al-Monitor:  Why did you want to postpone the Libyan reconstruction project until a government is elected?

Hamad:  I called on postponing the project of reconstruction of Libya until a unified government is naturally formed through a free electoral process. The Libyan reconstruction project is a strategic project, and the decision to start it must be issued by a government representing the will of the entire Libyan people.

Al-Monitor:  The head of the High National Elections Commission (HNEC), Emad al-Sayeh, told Al-Monitor that lack of funding is the main challenge facing the HNEC, and since you are in charge of financial matters in your government, what is your explanation for this problem?

Hamad:  The state allocated to the HNEC, much like to other state bodies, funds from its public budget. Searching for resources to cover the budget and ensuring technical supervision of its implementation are a core mission of the Ministry of Finance. Funding the HNEC follows a process similar to that of funding all other state bodies. If Sayeh meant to say that the allocated funds were not enough, [we reassure him] that the GNA’s Presidential Council instructed the allocation of funds to the HNEC.

Al-Monitor:  Is there a disagreement within the GNA’s Presidential Council on holding elections, as claimed by Sayeh in his interview with Al-Monitor?

Hamad:  There is no disagreement within the GNA’s Presidential Council over holding elections. All leaders are supportive of the elections and we support and welcome this step.

Al-Monitor:  A committee was formed to collect Libya’s outstanding debts from borrower states. What are the latest steps by this committee?

Hamad:  The committee addressed the Ministries of Finance in the borrowing countries, urging them to expedite the settlement of their unpaid debts in view of the country’s current circumstances. A number of meetings were held — including representatives from the Department of Institutions and International Cooperation at the Ministry of Finance, the International Monetary Fund, the Central Bank of Libya, the Libyan Foreign Bank and the International Cooperation Department at the Ministry of Foreign Affairs — to discuss the debt repayment mechanism. The meetings stressed the need to promote diplomatic action and send letters to borrowing states to expedite and settle their outstanding debts to Libya. The committee also asked the IMF not to grant the borrowing states that failed to meet their obligations to Libya any IMF loans until they settle their obligations to the State of Libya.

Al-Monitor:  How many countries had borrowed from Libya? Did the committee calculate the value of loans granted by Libya to these states?

Hamad:  Thirty-one countries have outstanding debts to Libya, including Arab, African and other countries. The total value of loans, in principal, interest and late fees is around $4,119,600,000.

Al-Monitor:  What are the obstacles Libya faces in recovering its international loans?

Hamad:  The borrowing states have yet to respond to the repeated requests of the Ministry of Finance due to several factors. These countries invoke political division or claim the amounts due cannot be secured from their state budgets registering a deficit.

Al-Monitor:  The official exchange rate for the dollar is 1.3 dinars compared to more than 4 dinars on the black market. Is there any plan to float the dinar like Egypt or to modify the exchange rate?

Hamad:  The existence of an official exchange rate and a black market rate illustrates a distorted national economy. The split of the central bank of Libya into two, each with a separate board of directors, is a major reason for the failure to implement a clear economic policy on floating the Libyan dinar. This measure is closely linked to the unification of the central bank of Libya and the formation of one board of directors that can develop an efficient exchange policy in accordance with the law.

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Found in: libyan elections, libyan economy, exchange rates, reconstruction, civil war, finance, gna, economic policy

George Mikhail is a freelance journalist who specializes in minority and political issues. He graduated from Cairo University in 2009 and has worked for a number of Egyptian newspapers.

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