Al-Hadi Abdelqader Writes: Libya Between the Economic Model Crisis and the Need for a Hybrid System for Financial Settlement

Written by financial and banking expert Al-Hadi Abdelqader: Libya Between the Economic Model Crisis and the Need for a Hybrid System for Financial Settlement

A comprehensive analysis of the governor’s resignation and the future of monetary policy amid the digital transformation and artificial intelligence

Introduction: Between Tripoli’s Celebrations and a Decision-Making Vacuum

At a time when Tripoli was celebrating its status as the capital of culture, while Benghazi was preparing to take over the title of Arab Culture Capital on September 16, the national financial scene was experiencing an institutional earthquake marked by the resignation of Central Bank of Libya Governor Naji Mohammed Issa on August 9, 2026.

The resignation, which did not provide details about the reasons in its official text, was not a sudden development. Rather, it was the culmination of a deep structural conflict between fiscal policy—public spending and subsidies—and monetary policy—exchange rates and reserves. As an expert in international payment systems and banking settlement, and one of the individuals commissioned by the Central Bank of Libya, I believe this resignation is not merely an administrative change. It is an early warning that Libya’s economic management model has reached an impasse, and an incentive to propose radical solutions based on technological integration and institutional reform that can no longer be postponed.

“Poverty is not merely a lack of money; it is the deprivation of the ability to realize one’s full potential as a human being.”

— Amartya Sen, 1998 Nobel Laureate in Economics

Building on this statement and drawing inspiration from the practical insights presented by Abhijit Banerjee and Esther Duflo in their seminal book Poor Economics, this article reinforces the intellectual and policy foundations of the proposed hybrid system between CHIPS and CIPS, and places the decisions of the Central Bank of Libya within the context of actual human behavior rather than abstract theoretical frameworks.

First: Reading the Crisis — Why Did the Governor Resign?

The resignation of Naji Issa cannot be separated from the impossible economic equation he faced, which can be summarized in three interconnected cycles:

1. The Spending and Dollar Cycle

Libya imports most of its needs, while the state receives its revenues in dollars from oil and spends in dinars. The unified spending agreement of April 2026, amounting to LYD 190 billion, placed the Central Bank in the position of sole financier, while reserves were being depleted to finance the subsidized fuel import bill, a significant portion of which is leaking away through smuggling.

2. The Subsidy and Rent Cycle

Fuel subsidies are no longer merely a social policy. They have become a black hole that absorbs dollars. The state sells oil for dollars and then buys fuel again in dollars to sell it domestically at low prices, creating a huge price gap that fuels the parallel market and drains reserves.

3. The Exchange Rate Cycle

When public finances are not reformed, pressure shifts to the exchange rate. Defending a low administered exchange rate depletes reserves, while allowing the exchange rate to adjust places the burden on citizens through inflation. The governor found himself caught between the hammer of fiscal policy and the anvil of reserves.

For this reason, his resignation was logical in its context and justified in its timing. It reflects an awareness that remaining in office could make him a witness to an inevitable catastrophe, and represents a courageous step befitting a perceptive man who reads the numbers with an expert’s eye.

Second: The Hybrid System Between CHIPS and CIPS as a Mechanism for Correction

Amid this structural crisis, advanced technological solutions long advocated by international financial institutions come into play. The proposed hybrid system links CHIPS, for dollar settlement, and CIPS, for yuan settlement, through an intelligent intermediary layer. It represents an effective tool for addressing liquidity, compliance, and sanctions-related challenges.

1. Managing Time Gaps

CIPS operates around the clock, while CHIPS operates within a limited time window, from 9 a.m. to 6 p.m. New York time. Through a Smart Routing Engine, the hybrid system automatically redistributes transactions to avoid periods of interruption, ensuring a secure flow of liquidity and reducing reliance on the parallel market to meet importers’ urgent needs.

2. Sanctions Compliance and Anti-Money Laundering (AML/CFT)

The hybrid system functions as a digital firewall, automatically screening transactions against international sanctions lists, including OFAC and United Nations lists, alongside the requirements of the Libyan Financial Intelligence Unit (Libyan FIU) and the goAML system.

This ensures that financial transfers, whether through CHIPS or CIPS, do not violate Security Council resolutions 2769/2025 and 2819/2026, while enhancing transparency in exposed interlinked accounts.

3. Supporting the Move Toward Zero Cash and Financial Inclusion

With the value of electronic transactions reaching LYD 643 billion in seven months, the digital transformation has demonstrated its effectiveness. The hybrid system complements this process by providing real-time settlement for electronic payments, moving institutions away from the fragility and anxiety associated with a BANI environment and toward a resilient system capable of withstanding fluctuations in a VUCA environment.

Third: Responsible Artificial Intelligence as a Pillar of Financial Transformation

Amid rapid developments in artificial intelligence, adopting the principles of Responsible AI has become an urgent necessity to ensure the sustainability of digital transformation in Libya’s financial sector. International reports, such as the World Economic Forum’s Advancing Responsible AI Innovation: A Playbook (2025), indicate that fewer than 1% of institutions worldwide have fully and proactively implemented responsible AI practices.

1. Responsible AI Strategy

The Central Bank of Libya and Libyan financial institutions should adopt a clear responsible AI strategy that includes:

• Governance and accountability: Appointing AI leaders with clearly defined powers and responsibilities.
• Systematic risk management: Adopting frameworks such as the NIST AI Risk Management Framework and adapting them to the Libyan context.
• Transparency: Regular reporting on responsible AI practices.

2. Trusted Data Governance

AI innovation requires secure, high-quality data. Libyan financial institutions should:

• Implement a unified data governance strategy across the institution.
• Explore data-sharing models such as Data Trusts.
• Ensure compliance with data protection standards, such as the Libyan banking-sector data protection regulations.

3. Responsible Innovation by Default

Responsible AI design should be the default approach in developing financial products and services, with a focus on:

• Inclusive design: Taking into account the needs of all segments of society, including people with disabilities and marginalized groups.
• Resilience: Designing systems capable of withstanding shocks and crises.
• Disclosure of environmental impacts: Measuring and reducing the carbon footprint of AI systems.

Fourth: Fairness and Inclusion in Measurement — Beyond GDP

In the context of redefining progress and prosperity, the High-Level Expert Group’s report Counting What Counts: A Compass of Progress for People and Planet (2026) represents a key reference. The report recommends moving beyond measuring economic output alone toward measuring fair, inclusive, and sustainable well-being.

1. An Integrated Conceptual Framework

The report proposes a framework consisting of four main components:

• Core principles: Peace, human rights, and respect for the planet.
• Current well-being: Material conditions, health, education, security, social cohesion, institutional quality, and environmental quality.
• Justice and inclusion: Measuring inequality and poverty across population groups.
• Sustainability and resilience: Measuring productive, human, social, institutional, and natural capital.

2. Applying the Framework in the Libyan Context

The indicators proposed in the report can provide a more comprehensive picture of progress in Libya, going beyond simple GDP growth. For example:

• Health and security indicators: To assess the impact of crises on quality of life.
• Social cohesion indicators: To measure trust in institutions and social cohesion.
• Sustainability indicators: To assess the extent to which natural resources are being depleted or preserved.

3. Implications for Monetary and Fiscal Policy

Adopting this framework would help to:

• Direct public spending toward sectors with the greatest impact on citizens’ well-being.
• Improve resource allocation based on the needs of the most vulnerable groups.
• Strengthen accountability by measuring progress across multiple dimensions.

Fifth: Management in an Era of Increasing Risks

In Jamie Dimon’s letter to shareholders, as Chairman and CEO of JPMorganChase, in April 2026, he presented a profound perspective on corporate management in an era of increasing risks. This perspective contains valuable lessons for financial institutions in Libya.

1. Comprehensive Risk Management

JPMorganChase manages risk through a “Through the Cycle” approach, examining multiple scenarios, including worst-case situations such as a severe recession, a 40% decline in stock markets, and a doubling of credit losses. Even under the worst scenarios, tangible common equity returns remain around 10%.

This approach demonstrates the importance of contingency planning and stress testing, which the Central Bank of Libya and commercial banks should adopt.

2. Preparedness for Shocks

Dimon emphasizes that safety and resilience in the face of geopolitical risks—including wars in Ukraine and Iran—energy prices, trade relations, political polarization, large global deficits, and high asset prices require continuous vigilance and preparedness for all possibilities rather than reliance on optimism or linear forecasts.

This lesson is particularly important for an economy heavily dependent on oil and exposed to recurring geopolitical and economic fluctuations.

3. Cyber Risks

Dimon identifies cyber risks as one of the greatest threats facing major corporations. In Libya, with the expansion of electronic payments and digital transformation, protecting financial infrastructure against cyberattacks must be a top priority, alongside investment in digital defense systems and continuous awareness.

Sixth: Strengthening Security and Resilience in Libya’s Financial Sector

Inspired by JPMorganChase’s Security and Resiliency Initiative, which involves a $1.5 trillion investment over 10 years in critical industries related to national security, a similar concept could be applied in the Libyan context.

1. Financial Security as Part of National Security

Investment in financial infrastructure should focus on:

• Strengthening national payment systems, including LYPay, OnePay, and the hybrid system with CHIPS and CIPS, to ensure continuity of financial services under all circumstances.
• Securing financial supply chains by diversifying sources of financing and international partnerships.
• Building national capabilities in financial technology and cybersecurity.

2. Public-Private Cooperation

As demonstrated by the Detroit experience cited by Dimon, cooperation between the public and private sectors can produce exceptional results in addressing economic and social challenges. In Libya, this cooperation could focus on:

• Financing small and medium-sized enterprises to create jobs.
• Developing young people’s digital skills to meet labor-market requirements.
• Improving telecommunications and energy infrastructure to support digital transformation.

3. Strengthening Institutional Resilience

Libyan financial institutions should adopt a proactive approach to risk management, including:

• Updating internal governance systems to align with international best practices.
• Building specialized teams for crisis and emergency management.
• Conducting regular training and exercises to test the readiness of systems and personnel.

Seventh: Reviving the Libyan Dream — Lessons from the American Dream Initiative

The American Dream Initiative launched by JPMorganChase is based on the belief that providing opportunities for everyone is the foundation of a nation’s strength. The initiative includes six areas of focus that can be adapted to the Libyan context:

1. Business Growth and Entrepreneurship

• Expanding access to capital for small and medium-sized enterprises.
• Providing advice and training to entrepreneurs.
• Facilitating small businesses’ access to supply chains and government contracts.

2. Affordable Housing

• Increasing housing supply by simplifying procedures and providing financing.
• Supporting homeownership programs for low-income citizens.

3. Financial Health and Wealth Building

• Expanding access to banking services and digital financial products.
• Promoting financial literacy to reach millions of customers, students, and small businesses.
• Providing digital financial tools that help individuals manage their budgets and build savings.

4. Skills and Jobs

• Linking training programs to actual labor-market needs.
• Expanding vocational training programs in technical and industrial fields.
• Supporting retraining programs for the unemployed.

5. Healthcare

• Supporting initiatives to improve access to healthcare services.
• Enhancing transparency in healthcare costs.

6. Local Institutions

• Providing funding and support to schools, hospitals, and nonprofit organizations.
• Supporting local governments in implementing development projects.

Eighth: Addressing Imbalances — Who Bears the Cost of Correction?

The governor’s resignation has raised the most important question: Who bears the cost of correcting the economy—the Treasury, the reserves, or the dinar?

In my view, the answer cannot be one-dimensional. Instead, it must be an integrated package based on:

1. Gradual reform of fuel subsidies, ensuring that poor citizens do not bear the cost alone, while directing subsidies through transparent digital platforms, just as electronic payments are managed through LYPay.
2. Activating the role of the hybrid system in regulating demand for foreign currency, by linking access to dollars to genuine commercial transactions authenticated through ISO 20022 mechanisms, thereby eliminating rent-seeking speculative demand.
3. Separating public finances from monetary financing, meaning ending the policy of “printing dinars” to finance the deficit and moving toward genuine government debt instruments, while making use of the B2G Data Platform to ensure transparency and provide reliable data to decision-makers.
4. Strengthening transparency and risk reporting, in line with new requirements in global financial legislation, such as the European Union’s AI Act, by adopting frameworks for reporting financial and operational risks associated with digital transformation and payment systems.
5. Adopting multidimensional well-being indicators to evaluate economic and social performance, going beyond GDP to include health, security, social cohesion, institutional quality, and environmental quality.

Ninth: Moving Beyond VUCA, FUCA, and BANI Toward a Stable Financial Culture

The governor’s resignation, despite its bitterness, gives us an opportunity to reset our compass. Moving beyond fear and uncertainty requires:

• An institutional financial culture that relies on systems and technologies rather than individuals.
• Activating the legal provision that allows the Central Bank to exercise its supervisory role without political interference that places it in the position of an emergency responder rather than a policy planner.
• Strengthening digital defense to protect financial infrastructure against breaches aimed at undermining confidence.
• Adopting responsible AI practices to ensure that digital innovation strengthens inclusion and trust rather than undermining them.
• Redefining the standards of progress and success to include citizens’ well-being and resource sustainability, rather than focusing solely on abstract economic growth.

As Minister Salem Al-Alam said at the Tripoli cultural celebration: “Investment in creativity is no less important than investment in infrastructure.”

I would add: Investment in financial governance and responsible digital transformation is the only guarantee for sustaining any cultural or economic recovery.

Conclusion and Recommendations

The resignation of Naji Issa is not the end of the road, but rather the beginning of a comprehensive review that should be led by the rational voices within the state. I recommend the following:

1. Immediately begin implementing a pilot phase of the hybrid CHIPS-CIPS system through major commercial banks as a practical tool for restoring confidence in official international transfer channels.
2. Restructure energy subsidies according to a clear timetable, while compensating the most vulnerable groups through conditional cash support delivered electronically.
3. Issue a national monetary and fiscal policy charter defining the powers of each institution and ensuring that the Central Bank is not burdened with responsibilities outside its mandate.
4. Accelerate the launch of a trusted B2G Data Platform as a national financial data center that supports efforts to combat corruption and money laundering and strengthens prevention rather than merely responding after the fact.
5. Adopt a national Responsible AI framework for the financial sector that guarantees transparency, accountability, and fairness in the use of artificial intelligence technologies.
6. Adopt multidimensional well-being indicators to evaluate economic performance, going beyond GDP to include health, security, social cohesion, and environmental sustainability.
7. Strengthen public-private partnerships in vocational training, small-business financing, and the development of digital infrastructure.
8. Establish a specialized financial cybersecurity unit to protect financial infrastructure against advanced cyberattacks.
9. Issue periodic reports on responsible AI practices within financial institutions, in line with growing global requirements for transparency and disclosure.
10. Strengthen international partnerships to transfer knowledge and build capacity in financial technology, artificial intelligence, and data analysis.

In conclusion, we stand today before two parallel scenes: a cultural scene heralding a renaissance, and a financial scene rearranging its cards. Between them, hope remains tied to the will of Libyans to build a state based on institutions and the rule of law, where money is a tool for development rather than a weapon of conflict, and technology is a means of strengthening justice and transparency rather than widening the gap between groups and generations.