By Sami Zaptia.
London, 19 March 2018:
The Beida-based Central Bank of Libya (CBL) is issuing certificates of deposit (a form of treasury bills or bonds) to banks for a one-year period.
In its announcement, CBL Beida said ‘‘The Central Bank of Libya is pleased to announce to all operating banks that deposit certificates will be issued at a discount rate of 1.75 to be paid in cash at maturity and for a period of one year and within 50% of the balances deposited with the Central Bank of Libya. The certificates of deposit are scheduled to start on 18 – 3 – 2018, with the date of issuance on 28 – 03 – 2018’’.
To be clear, this offer is being made by the CBL in Beida and not the Tripoli-based CBL. The Tripoli-based CBL is the only internationally recognized Libyan central bank.
However, there has been a split in the board of directors of the CBL with the majority aligned with the Beida CBL and against the Tripoli CBL headed by Saddek Kaber. The Beida CBL is aligned with the House of Representatives whereas the Tripoli CBL is aligned with the internationally recognized Faiez Serraj Presidency Council and Government of National Accord.
Due to Libya’s historic oil contracts, Libya’s share of its oil exports are all deposited in accounts controlled by the Tripoli-CBL.
According to current Libyan law governing the operations of the CBL, any 4 members of the CBL board can make a majority decision and overrule the CBL Governor. As far as the pro CBL Beida members, this provides legal cover for the move to raise finance through bonds.
Libyan business and financial analysts told Libya Herald that the whole move is designed to raise capital for the eastern authorities and cover their accumulated deficits. It also enables the CBL to save any deposits it has. They point out that it is up to the commercial banks in Libya to decide if they wish to risk buying these deposits and facing any future legal consequences if CBL Tripoli chooses to challenge them.
It will be recalled that the eastern Interim Government headed by Adbullah Thinni raised finances after the 2014 Libya Dawn-Karama split which it announced it had paid in full last year.
Analysts say that that deficit was paid simply by the eastern authorities printing new money in Russia and paying the banks in cash. They see the move as inflationary, increasing demand for scarce black-market hard currency and leading to the further reduction of the purchasing power of Libyan citizens.