A deal backed by leaders on both sides of Libya’s political divide to appoint a new central bank governor has the potential “to resolve all the political issues” in the country, Libya’s head of state has said.
Mohamed al-Menfi, the president of Libya’s Presidential Council who is largely aligned with the UN-recognised government in Tripoli, was accused of acting unilaterally and propelling the country into fresh turmoil when in August he dismissed the previous long-serving bank governor, Sadiq al-Kabir, who then fled into exile.
Kabir’s dismissal led to a shutdown of oil production and exports by forces in eastern Libya – rivals to the Tripoli government – who were furious at Menfi’s decision.
Libya’s deep political divisions have given the central bank the key role of distributing state revenues between the east and west.
In a rare interview with western reporters given at the UN in New York, Menfi justified his decree by claiming Kabir had been managing the bank’s funds, largely made up of oil income, “without any form of accountability” and “had exploited the state of division” in the country.
“It was an abnormal and unsustainable situation,” he said.
He said he had also issued his decree “to spare the capital, Tripoli, from a certain war that would directly target the Central Bank after the failure of months of negotiations between the dismissed governor and the parliament”.
He claimed Kabir had lost the support of the armed forces in Tripoli. “I tried to convince Kabir to share financial decisions in the country with others through the supreme financial committee. People were complaining they were not getting paid,” he said.
Kabir has said he and other senior bank staff were forced to leave the country to “protect our lives” from potential attacks by armed militia and described the attempts to remove him as illegal.
The deal to appoint a new governor and a deputy brokered by the UN mission in Libya has to be ratified by the country’s two key representative bodies, the High Council of State in the west and House of Representatives in the east.
Under the deal, Naji Issa is to be appointed interim governor, while Marai al-Barassi continues as deputy. A new board of governors, intended to be experts but reflecting the geographical interests in the country, will be nominated within two weeks to a month.
Menfi said the three main purposes of the deal were to ensure good governance; for there to be accountability and transparency; and to enable a financial committee to distribute money equally inside the country.
“The agreement that has now been reached regarding a governor and a deputy has happened because of the pressure we exerted to create a transparent administration and an integrated board of directors,” he said. “We have to put the money away from politicians and for it to be run by a financial committee.”
It is not clear how long the interim deal will stick, but first indications are that it will be enough for eastern forces who played a role in agreeing the new board and may now be minded to end the shutdown on oil production and exports. Oil production, concentrated in the east, had fallen from 1.2m barrels a day to about 350,000.
Menfi’s critics say the dismissal was not purely about accountability, but the west’s loss of trust in how Kabir was distributing revenues. He denied the interim bank leadership he had installed had been unable to operate due to loss of access to the international banking system. But prices did rise as the value of the dinar fell.
He said as a result of the deal “international accountability should return by reinstatement of the international auditor that was unilaterally suspended by the previous and without the approval of any other institutions”.
Kabir has accused the government of not implementing reforms and spending money irresponsibly. He said the state had spent more than 420bn dinars since 2021, most of which was on consumer spending and not on development investments.
Menfi said the agreement might open the path to tackling corruption in the country, including the smuggling of heavily subsidised fuel. That, he said, was turning into “a real obstacle “to any economic development”, adding: “There are ideas to replace it gradually with direct cash support that will stimulate investments and create a private sector in the field of oil housing and transportation.”
He also backed simultaneous national parliamentary and presidential elections – long promised by all Libyan politicians – to end the existence of two competing legislative councils. He said the difficulty with presidential elections was that people were fearful of being excluded if someone else was elected. “We tried to go for parliamentary elections on its own and it did not work,” he said.
He said the long-term economic prospects for Libya were bright, and the country could diversify away from its dependency on oil.