Tag: central bank

The Governor of the Central Bank of Libya, Naji Issa, stated regarding the Banking Investment Initiative that it is not necessarily meant to be implemented next month, but rather to be ready as part of a broader vision. He emphasized that without a comprehensive economic vision aligning all policies and defining real objectives, such a project cannot achieve its goals. “The Central Bank’s initiative is one we are ready for today — a prepared document and project — but without restructuring and reforming Libya’s economy, no initiative will achieve its purpose. The Central Bank cannot operate independently in all areas, even in monetary policy,” he said.

Issa added: “Without the oil sector, we have no economy. We have initiatives, and the private sector is striving, but it faces many challenges. If oil prices drop to $52 per barrel, the state won’t be able to pay salaries. We must ask: What will Libya’s economy look like in the next three years? Will the state continue employing more than 2.5 million people in the public sector and spending 80 billion on salaries at the expense of development funding?”

He further noted that while government development projects have added value, they are not productive value-added projects and thus cannot be financed by the Holding Company. The credit extended by banks — often seen as consumer loans — actually covers citizens’ income deficits, since incomes have remained low for decades. “If we do not increase citizens’ purchasing power, private sector investments will not find the demand needed to consume the goods and services produced. Stimulating credit and purchasing power is what drives growth itself,” Issa explained.

He continued: “The banking sector is fulfilling its role, though there are shortcomings — not due to the Central Bank, but because of the circumstances we face. The situation and environment are not ideal for designing monetary or economic policies.”

Issa also pointed out that he is working with two governments — not by choice, but as a reflection of reality on the ground. “The Ministry of Economy is divided, the Ministry of Finance is divided, and so are all state institutions. How can we establish a Holding Company and launch it next month amid this division? Even political division has imposed a reality on the Central Bank. Everyone blames the banking sector and the Central Bank, but there are no magical solutions without a unified vision and functioning state institutions,” he said.

He revealed that the state currently needs around $3 billion based on current spending rates, while net revenues deposited in the Central Bank may not exceed $1.5 billion, posing a major fiscal challenge.

Issa concluded: “We have demands from traders, the private sector, and banks. We all hope that problems will be solved and citizens can live in prosperity — this is our goal and the government’s goal — but the current reality limits these solutions. The banking sector and the Central Bank are under pressure, yet hope remains in the initiatives that will soon be implemented.”

Economic expert Idris Al-Sharif told our source exclusively: “The Libyan economy is a simple cash-based economy. Despite efforts to expand electronic payment services, which have achieved remarkable success over the past year, the preference for liquidity—arising from the fact that many economic activities and transactions can only be conducted in cash—forces citizens to seek cash even if it costs them part of their limited income, through practices known as ‘burning checks’ or accepting a lower cash amount.”

He added: “Almost all types of services—especially those related to foreign labor in construction and various trades, private education and healthcare services, real estate rentals (shops or residences), and simple retail trade—require immediate cash payments.”

He also said: “Therefore, the scenes of people crowding banks and standing (reluctantly) in long queues at ATMs should not be imagined as mere entertainment or a way to pass time!”

He continued: “At the same time, it cannot be ignored that most shadow economy activities—both legal and illegal—which make up a large portion of the economy, strongly prefer not to deal through the banking system (in dinars or dollars) and will continue to use cash regardless of how much electronic services expand.”

▪︎ “The Central Bank is aware of all these facts!”

It was expected that when the Bank decided to withdraw more than twenty billion dinars (in three denominations), (and it may have had valid reasons), it would at least consider printing half of this amount to replace the withdrawn value to prevent the crippling crisis we are witnessing today.

▪︎ “Now that the situation has occurred, the short-term option is to accelerate the printing of currency to compensate for a large portion of what was withdrawn. The Central Bank should know or anticipate that any amount distributed will not easily return to the banks under current withdrawal restrictions and fees, and that people will understand it will not be replaced in the short or medium term, at least!”

He added: “Therefore, the Central Bank must rebuild the collapsed trust between the public and the banking system it supervises. In this context, it could announce that anyone depositing new funds in a bank can withdraw them anytime, in full, without restrictions or fees, while maintaining the restrictions and fees on previous balances and deposits if necessary.”

▪︎ “It should be noted that total bank deposits have exceeded 112 billion dinars—more than double the value of currency in circulation in the market, approximately 54 billion dinars, according to the latest economic bulletin issued by the Central Bank.”

He concluded: “The banking system has failed to reinvest its excess deposits, which amount to over 80 billion dinars (after the mandatory reserve), and to inject them into the economy in the form of investments (the primary function of banks), even though the Libyan economy suffers from unemployment and poor use of resources. The reasons are well known, many of which are beyond the control of the banking system, which obviously cannot risk depositors’ funds without guarantees in an unfavorable and highly risky investment environment.”