Egypt Pulse

Is there hope for reforming Libya’s shattered economy?

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Article Summary
In an interview with Al-Monitor, Libyan Economy and Industry Minister Nasser al-Dersi talks about the Government of National Accord’s new economic reform program and the challenges it faces.

CAIRO — The Tripoli-based Government of National Accord (GNA) in Libya is getting ready to implement an economic program that includes several areas of reform, including to the official exchange rate and the black market. The official price of a dinar currently stands at $1.37, while on the black market, it is 6.60 dinars to the dollar, with the currency increasingly losing value.

Al-Monitor interviewed Economy and Industry Minister Nasser al-Dersi by phone on Aug. 8 to discuss the elements of the forthcoming program and obstacles facing it. The big question is how will the GNA implement the program given the parallel interim government in eastern Libya and the Central Bank's division into a GNA branch based in Tripoli and another affiliated with the interim government in al-Bayda, in eastern Libya, and recognized by the Libyan parliament in Tobruk?

The text of the full interview follows.

Al-Monitor:  What are the features of the economic program being prepared by the Ministry of Economy and the GNA prime minister, Fayez al-Sarraj?

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Dersi:  The economic program is comprehensive and includes several themes aimed at reforming the Libyan economy, which faces several problems. The Ministry of Economy is handling the reform of the commodity price system and subsidies, and the economic program includes amendments to the [subsidies] system. The Price Stabilization Fund will control prices of strategic commodities [to maintain suitable prices on the local market]. The trader won’t be able to insist on a high price because the fund is responsible for controlling prices and allowing traders a profit margin that ensures client and trader satisfaction in a fair way instead of net and full government subsidies for commodities.

Al-Monitor:  What are the expected obstacles facing the implementation of the economic program?

Dersi:  The economic program … is facing obstacles, mainly the division of the Central Bank into two branches: one in Tripoli and one in al-Bayda. In addition, the presence of a parallel interim government in eastern Libya is not helping because it spends out of [a separate] budget and is not transparent about its financial policy. Meanwhile, the internationally recognized GNA [is authorized to deal] with the whole Libyan market without discrimination between east and west. Therefore, the difference in opinion between the GNA and the parallel bodies impedes a financial economic policy that applies to all Libyan territories. We need one government and one central bank to implement comprehensive reform.

Al-Monitor:  How will the economic program be implemented, amid the division and multitude of bodies and a parallel interim government in al-Bayda in eastern Libya?

Dersi:  There are conflicting views with the parallel bodies, and it is a problem for the implementation of the economic program. At the level of coordination, there were attempts between the Ministry of Finance affiliated with the GNA and the Ministry of Finance affiliated with the interim government [in al-Bayda] to disburse employees’ salaries. The major differences in opinion and divisions have made the east feel isolated from the reform process. Cooperation with any parallel body, however, is not the solution. Righting a wrong with a wrong and giving legitimacy to an unrecognized entity is not the way to go about things. The solution is for parallel entities to be under the legitimate and internationally recognized government.

Al-Monitor:  The program includes developing and expanding the work of the National Oil Corporation (NOC) in Tripoli. What is your plan to develop and expand its work?

Dersi:  The program includes investment plans in the oil sector. The previous regimes did not care about investment in oil but exported it as crude oil. The economic program includes plans to turn Libya into an oil-exporting state and producer of petroleum to benefit from this sector. The program focuses on establishing more oil refineries and excavation companies inside and outside Libya and benefitting from Libyan expertise to produce and extract petroleum. Libya is a country whose economy is based on oil.

Al-Monitor:  Will the plan to develop the work of the NOC succeed, despite a parallel corporation in al-Bayda and the dissatisfaction of the eastern-based general commander of the Libyan National Army, Field Marshal Khalifa Hifter, with the management of the NOC, which is affiliated with the GNA in Tripoli?

Dersi:  The solution is for the NOC in Tripoli, which controls oil management, to succeed in developing a plan that will improve people’s lives. When this happens, neither the east nor the west [in Libya] will want to stand in the way.

Al-Monitor:  How will the economic program address the official dinar exchange rate and its price on the black market?

Dersi:  With the lack of security and order, we cannot implement a policy to float the dinar. This measure needs a secure situation, and there should be one policy center so that we don’t find two different exchange rates in east Libya and west Libya. A ministerial committee is examining the crisis and will present an applicable vision to solve the issue of the exchange rate difference stemming from the presence of parallel entities.

Al-Monitor:  Why didn’t past efforts to bridge the exchange rate gap succeed?

Dersi:  The division and multitude of parallel entities impeded all efforts to fix the exchange rate issue between the official and black markets and to reach monetary stability and restore the value of the Libyan dinar. A united government and central bank are necessary, as is security and stability. When these three elements are fulfilled, economic reform will be complete. Libya also lacks [sufficient] local currency flow in the market and banks. Also, public debt is on the rise. All these crises necessitate decisive measures that all parties can agree to for the sake of the Libyan people.

Al-Monitor:  The economic program includes a plan to address subsidies. Does that mean reducing subsidies? How will the government address the public's objection to such a step?

Dersi:  We must realize that food subsidies are off the table. The Price Stabilization Fund balances the price of strategic commodities, which are about 11 items, like wheat, sugar, rice and others. The trader commits to specific prices, which take into account the profit margin. The other commodities are subject to the dollar price as set by the market, which depends on supply and demand.

Al-Monitor:  How does the economic program alleviate the suffering of citizens under the power crisis and the increasing power cuts?

Dersi:  The hydrocarbon subsidy system in Libya should be revisited. Despite the current situation and increasing oil smuggling abroad, the price of one liter of gasoline is still the lowest in the world at $0.11. This should be acted on, and the difference in a price increase should be allocated to strengthening the power network and establishing power plants and stations to resolve the power cuts.

Al-Monitor:  What is the fate of the economic program with elections imminent, in December?

Dersi:  The elections [called by the United Nations] are still controversial, and there are forces supporting [them] and others objecting. The GNA will be fulfilling its duties, regardless of the [electoral] results. It is tough to delay economic measures that the citizens need. The government wants to fix the citizens’ situation, and it will do that until its last day.

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Found in: Economy and trade

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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