Libya’s Central Bank Crisis: An Unfolding Political and Economic Nightmare

Libya’s central bank has become the epicenter of a severe political and security crisis following the flight of its governor, Sadiq al-Kabir, and other senior officials. According to a Financial Times report, the exodus was triggered by threats from armed militias who have resorted to abducting family members of bank employees to coerce compliance. This alarming development reflects the deep-rooted instability that has plagued Libya since the fall of Muammar Gaddafi in 2011.

Al-Kabir’s departure highlights the acute dangers facing Libya’s financial institutions amidst the country’s ongoing political schism. The central bank, which manages billions of dollars in oil revenue, is caught in the crossfire between rival administrations. The Tripoli-based Government of National Unity, led by Prime Minister Abdul Hamid Dbeibah, has attempted to replace al-Kabir, escalating tensions with the eastern-based government led by Prime Minister Osama Hammad.

The conflict between Dbeibah and al-Kabir has intensified as the former accused the latter of mismanaging the economy and presenting a misleadingly positive outlook. Al-Kabir, on the other hand, argues that Dbeibah’s actions to remove him are illegal and violate UN-negotiated agreements concerning central bank leadership. This power struggle has further destabilized Libya, leading to a shutdown of oilfields controlled by the eastern government and exacerbating the country’s economic woes.

The situation at the central bank has led to a suspension of banking operations, leaving Libyans unable to access funds or conduct transactions. The new board of directors appointed by the Tripoli-based Presidential Council has struggled to assert control, leading to confusion and frustration among bank staff and the public. With salaries delayed and prices rising, the economic impact on ordinary citizens is severe.

This financial turmoil is compounded by Libya’s broader political instability. The country remains divided between rival governments backed by international powers, with the eastern faction receiving support from Russia and the western faction aligned with Turkey. The UN Support Mission in Libya (UNSMIL) has called for a halt to unilateral actions and the protection of central bank employees, but finding a resolution amidst the entrenched political divides remains challenging.

As Libya grapples with this latest crisis, the central bank’s plight underscores the broader challenges facing the country. The struggle for control over Libya’s financial resources is not just a matter of political rivalry but a reflection of the deep-seated issues that continue to hinder the country’s path to stability and recovery. The international community’s efforts to mediate and resolve the crisis will be crucial in shaping Libya’s future and ensuring that its financial institutions can function effectively amidst the ongoing turmoil.