Libyan and Arab bank and finance officials along with International counterparts met at a conference set up in London last month to discuss the Libyan financial crises and provide solutions in an attempt to avert a collapse in the economy.
There are many reasons for the state of the economy and its continuous spiraling downfall since 2014.
The sharp decline in international oil prices, lack of a functioning financial administration and the near complete halt to oil production are no doubt the main culprits when trying to determine the cause of the financial catastrophe.
Government subsidies are also one of the largest contributors to the economic downfall, especially fuel subsidies with an estimated 40% being smuggled out of the country to places like Tunisia, Malta and even Sicily.
A shortfall of income, when we look at the price of a barrel of oil being approx. $30 then multiply that by the amount of barrels per day which sits at approx. 400 – 500 BPD it is clear to see that the lower profit margin is creating an ever widening deficit especially when Libya is fully dependent on oil income.
The dire security situation is of course having a negative effect on the economy. Bank staff have been kidnapped and cash transport vehicles targeted which has contributed to the lack of confidence in the banks resulting in a majority of account holders clearing their accounts.
The political divisions, lack of confidence and general outlook for the future has forced large businesses and the wealthy to rethink where they place their finances.
Lack of cash, rise in the price of foreign currency in the black market, steady flow of the Libyan currency leaked out of the banks, the halt of all bank credits designed to provide foreign currency at the bank’s conversion rate and administrative corruption within the banks are hitting the economy hardest.
A UNICEF report has revealed that more than 974 thousand Libyan citizens under the age of 18 are in need of urgent humanitarian help because of dire security and the economic situation. The report also stated that over 2.4 million, 425 thousand being internally displaced refugees are in need of urgent help, and 28 thousand foreigners, some who are refugees are stuck in limbo within Libya. UNICEF declared that it will provide 9 million US dollars to provide humanitarian aid in Libya next year out of a total 19 million US dollars assigned to this program.
According to a statement made by the Audit Board, the separate parties who participated at the meeting in London discussed the problems and obstacles that faced the UN proposed government of Fayaz Seraj and how they could begin executing the financial steps in the budget for 2016.
A budget was brought forward and discussed for the attention of those representing the Central Bank of Libya representatives as follows.
1- Wages for the months of (10, 11, 12) 5 Billion Dinar
2- The NOC (National Oil Company) 600 Million Dinar
3- Fuel subsidies 750 Million Dinar
4- Students outside of Libya 500 Million Dinar
5- National healthcare, civic amenities and water 300 Million Dinar
6- Embassies and basic salaries 690 Million Dinar
7- Covering electricity shortages 800 Million Dinar
A total of 8.640 Billion Libyan Dinar
The head of the Libya Bureau Khaled Shakshak stated in a video interview that “80% of Libya’s financial problems could be solved by increasing the oil output of the country to 1 million BPD”. He added that this increase in output could easily be achieved if the Rayayna pipelines were opened.
This comes after the chief of the NOC (National Oil Company) Mustafa Sanalla stated last month that the NOC was trying to contact the armed groups mainly from Zintan to convince them into allowing maintenance units reopen the pipelines as the closure was the cause of a 27 Billion dollar deficit in the Libyan economy.
If the pipelines were to be opened it would be estimated to add a much needed 50 million dollars per day equating to 1.5 billion dollars per month. “If 1.5 Billion dollars per month were introduced to the economy we could introduce a basic plan between the government and central bank of Libya to pump this money into the market in the form of government credits and foreign currency which would in turn create 2.2 Billion Libyan Dinar monthly which can be returned to the government.
The question remains whether the politicians on the ground can steer the country’s economy away from collapse and provide real solutions to the problems that the everyday Libyan is facing on a daily basis queuing outside banks for hours.