Libyan Business Council warns of food shortages and increased prices due to CBL’s inflexible Letters of Credit policy
By Sami Zaptia.
London, 16 April 2020:
The Libya Business Council (LBC), the only legally recognized Libya-wide business council representing businesses, warned today of the possibility of food shortages and price increases, especially in foodstuffs, due to the inflexible policies introduced by the Tripoli Central Bank of Libya (CBL) on the opening of Letters of Credit.
The LBC said that this was especially the case in view of the current conditions the country is going through, in reference to war on Tripoli, the oil blockade and the outbreak of the Coronavirus – and their ramification on prices, supplies and trade.
LBC chairman Abdalla Fellah, warned of the upward increases in prices in the local market and his fear of the scarcity of goods, especially food stuffs, due to the inability to import and the usual flow of goods as a result of the prohibitive requirements contained in the CBL’s 8 April publication No. (2) to local banks on the conditions for opening LCs.
In a very damning swipe at the CBL, Fellah said that the CBL’s new conditions for opening LCs has returned businesses to the ‘‘times of directed trade’’, in a subtle reference to the bad old Qaddafi days where supporters and cronies of the regime received exclusive preferential treatment.
The accusation comes as the CBL today published a list of select companies it had opened LCs for. Accusations of corruption and favouritism have already been directed at it.
Fellah added that this prohibitive LC policy expressly reflects the central bank’s hegemony in its restrictive decisions and publications that don’t take into account current difficult circumstances that the world is going through in general and Libya in particular, which will have consequences for the Libyan market and therefore on the citizen in the form of scarcity of goods and high prices.
In the same context, the LBC referred to the Libyan Banking Association’s letter of 15 April to the CBL raising the same concerns about the scarcity of goods and price rises if a flexible mechanism in the implementation of documentary credits was not reached soon in order to easily provide the necessary goods to citizens at these difficult times.
Putting the call by the LBC for the CBL to be more flexible in its LC opening policy into context, it will be recalled that there is an ongoing battle between the Tripoli CBL and the Tripoli government as to who has ultimate control over economic and monetary policy.
The Tripoli CBL claims it is a technocratic monetary body not involved in political decisions and is the custodian of Libya’s reserves of wealth accumulated in the 42-year Qaddafi era.
However, as politics and economics are two sides of the same coin, the CBL has been accused of being in total control of spending decisions.
On 8 April, Libya’s internationally recognized Prime Minister, Faiez Serraj, launched a damning broadside on the CBL and its Governor Saddek El Kaber. He accused it of:
- Delaying the payment of state-sector salaries for three months.
- Delaying the release of the Emergency Budget.
- Unilaterally stopping the disbursement of foreign exchange.
- Attempting to force his government to raise the foreign exchange sale surcharge and setting a new rate without consultation.
- Halting the opening of LCs.
- Interfering in all the country’s decisions, including on, oil, health, Coronavirus, ammunition, municipalities and on rubbish collection.
- Failed to come up with reform policies.
He complained that the CBL was too rigid in its decisions during times of crisis and referred to the rest of the world and their extraordinary measures during the Coronavirus outbreak – let alone Libya and its virtually permanent state of crisis.
He saw no logic or wisdom in the halting of the opening of LCs at a critical time for the country time when other countries were increasing their strategic stocks of medical and food supplies. He placed the responsibility of this delay on El-Kaber, warning that even if he did recommence the issuing of LCs, it could be too late as the goods Libya needs may no longer be available during this Coronavirus crisis.
Serraj said that his government through its Economy Ministry should be the competent authority making the country’s economic decisions – and not the CBL. He complained that Libya’s monetary and financial policy and liquidity problems are the concern of the CBL and that it should do that job – including solve the country’s bank queues. Serraj said that its interference in all other government policy was causing confusion not solving other problems and was very dangerous and needed solving.
He said that the CBL failed to come up with reform policies – because its board is split and called for the reunification of the its board.
He said the CBL had become an unknown ‘‘black box’’ that no one knew how it operated. It wanted to interfere in all state institutions – but did not want anyone else to interfere in it, adding that It should accept its responsibility.
The CBL should reform its institutions under its competency, make liquidity available, reduce bank queues, complete its board, set foreign currency sales surcharge – instead of the government – and provide a monetary policy – by concentrating on its areas of competency.
In lieu of the adoption of Libya’s permanent constitution and subsequent full elections, the CBL considers the successive governments since the 2011 revolution that overthrew the 42-year old Qaddafi regime, as short-term interim governments with questioned legitimacy and, in the CBL’s view, limited mandate and authority. To this end it sees itself as the long-term custodian of Libya’s accumulated oil wealth. It expects prudence and sustainable policies from these interim governments.
This is especially the case in view of the war on Tripoli since April 2019, the oil blockade since January this year and the Coronavirus curfew since March.