Libyan Banking System at the Brink of Collapse

The U.N special envoy to Libya warned on Thursday that Libya’s banking system “will likely collapse” if the country’s two parallel central bank branches do not unify.
U.N special envoy to Libya Jan Kubis told the U.N Security Council that the division of the central bank, coupled with the lack of a unified budget, led to both branches racking up debt to finance their respective administrations.
Libya spiralled into crisis following the NATO-backed ouster of Muammar Gaddafi in 2011. It has been divided since 2014 between an internationally recognised government in the west and a rival administration in the east that has established its own institutions.

In 2015, fighters loyal to renegade General Haftar took over a Central Bank facility in the coastal city of Benghazi.
“Managing this debt is only possible if the central bank unifies. In plain terms, Libya’s banking system will likely collapse, absent unification,” Kubis said.
An international audit of Libya’s parallel central bank branches last week recommended steps that could lead to their eventual reunification. Kubis restated to the Security Council that the main finding was unification “is no longer simply recommended but required”.
Such reunification of the central bank will boost confidence among buyers of Libyan oil at a time when prices of the country’s main export are rising.
The Tripoli-based Central Bank, which has paid the salaries of many state employees across board, has received most of the oil revenues. Libya’s oil exports were hit by a blockade by eastern-based forces last year, leading to losses in proceeds.

In 2015, fighters loyal to renegade General Haftar took over a Central Bank facility in the coastal city of Benghazi.

A concerted peace process led by the U.N restored ceasefire last year which was followed by the formation of a unity government. However, talks this month aimed at paving the way for elections in in late December stalled.
Diplomats meeting in Berlin, said last month that Turkey and Russia, which back opposing sides in Libya, had reached an initial understanding on a step-by-step withdrawal of foreign fighters backed by them.
Libya’s new unity government Prime Minister Abdulhamid Dbeibah said the presence of foreign mercenaries “remains the most important obstacle to stability in Libya.”

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