Libya this week heralded the success of an alternative model for development, turning to bilateral partners such as Italy for assistance to stabilise its economy amid a civil war and in the absence of on-the-ground support from international financial institutions.
Since the International Monetary Fund left Libya in 2014, the Central Bank of Libya (CBL) has relied on a series of strong partnerships with foreign central banks to support its bid to overcome severe operational challenges, its governor Saddek Elkaber told GlobalMarkets.
“Our economy was set to strengthen and grow. Without the war we expect we would be in a much better situation.”
Despite the civil war, which arose after a disputed general election in 2014 led to the establishment of two governments, the CBL has reduced its foreign currency use from $47bn in 2013 to $12bn in 2016, and brought down inflation from a peak of 28% to minus 7%, while maintaining overall currency stability and access to cash for its citizens.
Libya has worked closely with partners in central banks including the US Treasury, the central banks of Italy, France, Germany and Tunisia, as well as on targeted programmes with the World Bank.
Two weeks ago, the CBL and Bank of Italy agreed on a programme to provide targeted assessments and recommendations to specific departments in the CBL, while Elkaber maintains strong relationships with the central banks of Tunisia, Morocco and Egypt.
The US Treasury “helped greatly” in drafting laws under Libya’s anti-money laundering and countering the financing of terrorism efforts, Elkaber said, and the CLB continues to work closely with the Central Bank of Tunisia to upgrade its core banking system.
Libya is also working closely with the World Bank to promote SME development and has recently become the 71st member of the European Bank for Reconstruction and Development (EBRD).
While Elkaber noted the success of these remote programmes, he said the lack of willingness for outside professionals to be on the ground in Libya was also holding back private sector development — a key focus for both the government and CBL.