Libya’s Central Bank crisis exposes lack of legitimacy and strong foreign meddling hampering Libya’s progress

Crises in Libya multiply, sometimes, at a daunting speed, making tracking and analysing them a difficult task even for pundits and professional commentators. In many cases, it takes the most trivial of triggers to engulf the country, particularly the capital, Tripoli, in a spiralling crisis usually involving guns and shootouts in broad daylight. Two young men, for example, firing at each other is enough for armed militias to widen the shooting match as they fight over turf and control. The victim is always the common man, especially when the crisis flares up in the capital, which is often the case.

However, the latest crisis surrounding who controls the Central Bank of Libya (CBL), which has not yet peaked in armed fighting, is a very serious one. As is usually the case in conflict-ridden Libya, the wisest of men and leaders are behind the latest episode of kids-play – like where the children are unaware of the consequences of what they are doing.

It all started on 12 August when Libya Presidential Council (PC) suddenly issued decree 19/2024 replacing CBL’s Governor, Sadiq Al-Kabir. According to all effective laws of the country and the Libyan Political Agreement of 2015 which has the power of the Constitution in a country that has none, PC does not have the power to replace Mr. Al-Kabir.

READ: Libya: central bank suspends operations after official kidnapped

Legally speaking, any such decision is void and illegal, a fact confirmed by a court ruling, ten days later. The ruling considered the decision void, thus suspending it, creating another dilemma.

But the law does not always apply in the Libyan political jungle. In fact, the Parliament which has the power to appoint and remove the CBL Governor, has already decided on two previous occasions to remove Mr. Al-Kabir who has been Governor since 2011. In 2014, the Parliament voted to replace the him, but the powerful man refused to obey, benefitting from the divisions in the country which was, and still is, under two different administrations, one in Tripoli where CBL is located and a parallel one in Benghazi, heavily influenced by the de facto ruler, General Khalifa Haftar. Again, in 2018, the legislator passed resolution 3/2018 to replace Mr. Al-Kabir with a financial expert, former CBL deputy governor and respected economist, Mohamed Al-Shukri. Again, Sadiq Al-Kabir did not budge and continued as if nothing has happened. This time, Mr. Al-Shukri declined  to accept the job in a Facebook post on 23 August, saying that he does not want to be part of “this mess” for which he earned people’s respect and recognition in thousands of social media comments.

This time, the crisis over CBL took bad, dirty and dangerous twists. The Parliament which, until a few weeks ago, criticised the CBL Governor, came to Mr. Al-Kabir’s rescue. The chamber voted on 17 August to suspend its 2018 decision removing Mr. Al-Kabir and, instead, reaffirmed him as Governor.  A few days later, the eastern-based government decided to shut oilfields, suspend oil production and exports—the main source of revenue of the country. They justified their action by claiming they want to “protect” Libya’s wealth. Again, no considerations were given to the fact that Libya depends heavily on revenues from oil and gas and the state workers might not even get paid if production stops.

Mr. Al-Kabir apparently counted on the support of both the United States and United Kingdom. Both countries have been top meddlers in Libya’s internal affairs ever since they led its destruction in 2011 to topple its former government, plunging it into chaos and lawlessness ever since.

Right after Mr. Al-Kabir was removed, the US envoy to Libya, Richard Norland, posted on X  warning  that “attempting to replace the leadership of [Sadiq Al-Kabir] the CBL” could lead to Libya being shut out of the “international financial markets”. To further emphasise the point that the US is openly and scandalously interfering in Libya’s internal affairs, the post was accompanied by a picture of Norland and Al-Kabir, shyly smiling.

Instead of mobilising support for Al-Kabir, the post earned him scorn and condemnations from his own fellow citizens who accused him of being an US agent, traitor to his country and diligently taking the CBL crisis to international level to keep his job.

READ: UN warns Libya faces economic collapse amid Central Bank crisis

 In fact, Sadiq Al-Kabir’s record as CBL Governor has been a complete failure. Since he was first appointed back in 2011, the finances of the country have been shambolic and messy and the entire banking system is a complete failure. Over the last 13 years, Libyans lost all trust in their banks which treat them badly, offer them terrible services but still overcharge them for whatever they get.

At least once every year, banks run out of money, forcing people to queue for hours to get whatever few Dinars the banks allow them to withdraw from their accounts. Sometimes, months pass and clients cannot even access their accounts to get money. Money in the Libyan economy is essential, since most other payments hardly exist. ATM machines are extremely few and rare in some parts of the capital, Tripoli, itself. They do not exist at all in place like Bani Walid and Majure in south-west and east of Tripoli, respectively. People in places like Ghat, Al-Zighan and l-Jawf in the south are yet to hear of them. In Libya today, according to some statistics, the average number of ATMs per every 100,000 people is 3.59 and, in any average day, most machines are out of order.

People also complain that, during Mr. Al-Kabir’s rather long reign as Governor of CBL, the value of the local currency has fallen rapidly while inflation went up, driving prices of basics extremely high.

The current fight over the CBL is clearly a fight over legitimacy, wealth and power but it also has another international dimension. It shows that the country’s sovereignty hardly exists and that foreign meddling still plays a critical role in what usually is a national domestic issue. It shows that the CBL remains the number one target of almost all the Libyan protagonists which leads to further politicising the institution’s work, forcing it to become another tool used by politicians for their own benefits.

Above all, the current crisis which is yet to be solved is a very strong indicator that any political solution to Libya’s ills will not be complete unless accompanied by consensual share of the country’s wealth. Most Libyan money comes from oil and gas and it is this that is causing most problems. While Libyans are as rich as Kuwaitis, for example, they live like Somalis—a contradictory situation that is very hard to explain, let alone justify, to the common man.

READ: Libya’s oilfield closures spread in standoff over central bank

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.