Libyan officials from the Government of National Accord (GNA) and the Central Bank of Libya are expected to convene in the Italian capital, Rome, to flesh out the details of an agreement aimed at pulling the North African nation out of an economic crisis.
Thursday’s planned meeting would be the second in a US-led initiative to prevent the Libyan economy from collapse after recent World Bank warnings of the rapidly deteriorating situation.
Owing to five years of armed conflict and political deadlock, the country has been prevented from exploiting its main source of income, oil, which accounts for more than 95 percent of export revenues. Today, Libyan oil production is reaching only a fifth of its potential, according to the World Bank. The drop in production has cost the government more than $68bn since 2013
The country is now running a major deficit, analysts say, forcing the Central Bank to tap into its fast-depleting reserves. The government is unable to pay salaries on time or fund public investment, and limits on cash withdrawals from banks are being imposed.
“People are certainly feeling the pressure of the economic crisis. The country’s finances have eroded significantly and if the current political turmoil is not solved then Libya’s reserves will run out,” Mohamed Eljarh, a political analyst with the US-based Atlantic Council think-tank, told Al Jazeera.
“Even those who do have money are only permitted to withdraw a certain amount of cash,” Eljarh said from the Libyan capital, Tripoli
Claudia Gazzini, senior Libya analyst at the International Crisis Group – a research NGO – estimates that foreign currency reserves have fallen from more than $100bn to $40bn since 2013. “This is impacting the Central Bank’s ability to access the reserves,” Gazzini told Al Jazeera
In early November, however, an agreement was reached in London at a meetingorganised by the US and Italy, to release $6bn worth of bank funds to the GNA and its leadership committee, which is referred to as the Presidency Council (PC). The funds are set to be allocated towards oil production and exports, salaries and electricity, among other things.
The GNA, a “unity government”, was formed under a United Nations proposal and subsequent agreement in December 2015. It was meant to bridge the political divide by replacing the two other rival governments operating in Libya. But since its installment in March 2016, the GNA has struggled to gather support on the ground.
Libya’s elected parliament, the House of Representatives, has also refused to endorse the GNA, making the move to supply it with bank funds illegal under Libyan law, says Eljarh. “The PC has no budget because the GNA is not endorsed. The House of Representatives did not introduce or approve a budget.
“What they are trying to do now has never existed in Libya before. They are trying to bypass Libyan law to offer the PC an emergency budget to operate.”