By Sami Zaptia.
Tripoli, 4 January 2014:
The GNC Energy Committee reviewed last Monday (30 December 2013) the cabinet’s decree (No. 759/2013) permitting the . . .[restrict]Ministry of Electricity and Renewable Energies and the Ministry of Oil and Gas the ability to take out loans from commercial banks.
The GNC Committee also reviewed the cabinet decision (No. 805/2013) regarding authorizing the refinery and petro chemical development plan.
It will be recalled that the government had announced in October its decision to construct two new refineries, one of 300,000 barrels capacity in Tobruk and the other with a 50,000 barrels capacity in Ubari as part of Libya’s downstream diversification policy.
The taking out of commercial loans to finance state projects, although rare, is not a totally new step by government bodies in Libya. It will be recalled that Gumhouria bank led a Libyan bank consortium in financing state-owned Libyan Airlines’ purchase of 14 Airbus aircraft.
The desire to free government development spending from the constraints of Libya’s relatively small budget of around LD 67 bn has been signaled by the government on numerous occasions in the past.
Quite clearly, if Libya is to launch on a Dubai-like development drive, its annual state budget of just under LD 67 billion is not going to achieve meaningful development and construction. It will be recalled that 31 percent (LD 20.7 bn) of the 2013 budget went on salaries while 15.9 percent (LD 10.6 bn) went on subsidies.
On paper, the development and construction sector received 28.9 percent (LD 19.3 bn) in 2013. In reality very liitle of this was spent on the secter due to the security situation.
Speaking at the opening of the “First Scientific Conference for Non-oil Exports” on 21 December last year in Tripoli, Industry Minister Sulieman Latief Al-Fituri said that the industrial sector must play an important role in the diversification of Libya’s economy by bringing added value, and added that he saw a major role for the banking sector, Libyan and foreign, in this process.
The Libyan banking sector has indicated it is willing to lend to the state. Gumhouria Bank Chairman Musbah Akkari told Libya Herald in July last year that Gumhouria bank holds a 45 percent share of the Libyan banking sector and is therefore in a strong position to take the lead in new products and services, including the provision of loans.
Libyan banks have been criticized for sitting on pools of cash and leaving the economy hungry for financial support. The Gumhouria bank chairman defended his sector last July. “People say we don’t lend”, retorted Akkari, “but when we find appropriate guarantees, we lend. Look at this huge loan (to Libyan Airlines), for example”, he had said.
“Where there are adequate guarantees, we are very happy to lend. We have initiated discussions with various ministries, for example the Ministry of Housing to propose loans and projects in the housing sector as well as the Ministry of Economy to propose loans for SME projects and to help the unemployed and for development up to half a billion dinars”.
“We have also made proposals for loans to the Ministry of Electricity for three solar power stations. We are also meeting the Ministry of Transport to discuss the possible loan to finance a proposed port in Shahat (Cyrene)”, he added listing various areas where his bank was hoping to provide loans.
“So you see, Gumhouria Bank is ready to give loans so long as there are adequate guarantees. We are ready to fund large projects on our own or jointly through a syndicate. We are ready to help the development of Libya”.
The Gumhouria Bank Chairman confirmed that Libya and its financial sector, private and public, have the money to self finance their future growth and development.
“The Libyan banking sector can provide loans of up to LD 100 bn”, Akkari explained. “This can go up to LD 400 bn with leverage”, he added. “We can help raise the standard of Libya’s economy and help its development and economic diversification to a high standard within four to five years”, predicted the confident Gumhouria Bank Chairman. [/restrict]