CBL to continue with agreed economic reforms
By Sami Zaptia.
London, 9 July 2018:
The Tripoli Central Bank of Libya said that despite the recent ‘‘financial developments and circumstances’’ that the country was going through, it will proceed with the implementation of the economic reforms agreed upon with the Presidential Council.
The declaration came at a press conference held in Tripoli on Thursday. The press conference did not include Governor Saddik El-Kabbir but was fronted by heads of departments.
The CBL said that it was in the process of implementing these reforms and that they were in continuous communication with the Faiez Serraj-led Presidential Council. The CBL revealed that formed three committees within the bank, each of which has been assigned certain competences and functions, some of which are in charge of developing procedures, controls and mechanisms for the implementation of reforms and procedures especially with regard to charging fees for foreign exchange sales.
The CBL also revealed that there will be ‘‘a package’’ or ‘‘procedures’’ taken to limit the (negative) impact of these reforms on low earners or the less well-off through what it referred to as ‘‘fair compensation’’.
The CBL was referring to the intended imposition of exchange rate restrictions or levies and to the reduction or removal state subsidies on hydrocarbons.
It will be recalled that the Tripoli CBL and the Presidency Council had agreed on a reform plan at a meeting held during the Libya Economic Dialogue meeting in Tunis on 5 June this year which was moderated by the US Chargé d’Affaires at the US Embassy in Tripoli (now in Tunis) Stephanie Williams.
The Libya Economic Dialogue meeting was the 8th such meeting which was attended by two members of the Presidency Council (PC), Ahmed Maitig and Fathi Majbri, together with Tripoli-Central Bank of Libya Governor (CBL), Saddek Elkaber. Majbri is the PC member in charge of the budget and economic affairs.
Notably, the Tripoli-based Audit Bureau, which usually attended these meetings, did not attend. It had had a fallout with the CBL which it accuses of being directly responsible for Libya’s economic austerity.
The Audit Bureau together with the PC and CBL has been jointly responsible for approving Libya’s budget. It is not clear if its absence will reduce the likelihood of the success of these planned reforms. However, over the years the Audit Bureau has been bullish in pushing the CBL for proactive economic reforms.
The meeting had agreed on four main economic measures designed to ease pressure on state spending and help alleviate the current economic burden on Libyan citizens, and especially the poorer sections of Libyan society.
These four measures are:
1) The reduction of subsidies on fuel and increasing its price from the current LD 0.15 a litre (about US$ 0.11¢ a litre at the official exchange rate).
2) The increase of the amount of the foreign currency annual allowance at the official rate of exchange, currently set at $500 per person.
3) The reactivation of the child allowance which has been frozen due to lack of state funds.
4) The devaluation of the Libyan dinar.
An ambitious target was set for the implementation of the plan, with the economic reforms planned to be in place by the end of July 2018. The increase in the annual foreign currency allowance and the reactivation of the stalled Child Allowance were meant to mitigate the effects of the reforms, especially those of fuel subsidies.
It will be noted that none of these agreed measures are new or a surprise. They have been discussed ad nauseam in Libya at various occasions and events organized by various bodies over the years. They had also been discussed at several of the previous economic dialogue sessions in Tunis, without results.
On 9 June the Tripoli CBL announced its three-tracked framework for the Tunis meeting reforms.
The CBL had stated that the framework was agreed at an expanded meeting attended by Tripoli CBL Governor Saddek El-Kaber, Fathi al-Majbri, member of the Presidency Council, Mohammad Takala, Chairman, Committee for the Development of Economic and Social Projects of the High State Council, and a number of advisers and CBL department directors.
The CBL said that a ‘‘practical framework for conducting the economic reform agreed upon at the recent economic dialogue sessions held in Tunis through three tracks has been agreed’’. These are;
1- Solving the Libyan dinar exchange rate issue through the imposition of fees on foreign currency sales and transfers.
2- Reforming subsidies.
3- Establishing a compensation mechanism to mitigate the repercussions and effects of the economic reform decisions on the livelihood of Libyan citizens.
Meanwhile, in a separate statement, HSC member Takala revealed that money accrued by the state from the foreign exchange levy ‘‘will be used to finance the Family Allowance, dealing with bottlenecks in infrastructure and the maintenance of hospitals and schools’’.
In theory, such deep economic reforms would need the House of Representatives (HoR), as the only recognized Libyan parliament, to pass a law. However, as a result of Libya’s political split, the Tripoli-CBL and the Audit Bureau have had increased powers in the economic and financial field. The Audit Bureau, in its financial oversight role, has also had the effective authority to stall any economic reform plans it objects to – and its stance on these reform plans is still unclear.
Moreover, the recapturing of the oil crescent by the Khalifa Hafter-led Libyan National Army and the handing over of these facilities to the eastern-based, and internationally unrecognized National Oil Corporation – could negate any attempts at economic reforms while Libya is not exporting any oil.