Local and international politics intertwined with tribal culture have produced a cocktail of high-level corruption, mistrust and right down animosity between those on whom the nation was counting for salvation. A nation whose people had suffered tremendous hardship at the hands of one of the world’s longest serving and most brutal dictators, Moamer Kaddafi. He ruled Libya for forty-two years with an iron fist and showed no mercy to his opponents or anyone who dared challenge his rule or speak ill of him.
Since the revolution in February 2011, which saw NATO’s unprecedented intervention, the country has descended into chaos. With different countries backing different individuals, groups and political parties that were thought to serve their interests, they set them against one another. Initially, Qatar and Turkey backed those known for their religious ideology, while Egypt and the Golf States backed groups calling for civil society. This latter group has been accused by the former of being ‘secular’. A word which in Arabic is considered synonymous with infidel. In Europe, Italy and France have backed rival factions, and of late the two countries have been more open in supporting them. More recently the situation has become more fluid and complicated, as some individuals and groups changed sides and new alliances have formed.
The breakout of civil war in 2014, was initially sporadic and intermittent, with various factions fighting for the control of different parts of the country. However, it has resulted in significant drop in oil production, which is Libya’s only source of revenue. Although the country has major international investment, information about the income from it was shrouded in secrecy by the Kaddafi regime, and has remained so even after the revolution. According to some recent British newspaper reports, much of that investment is being squandered by agents of the Libyan Overseas Investment Company. Reliable information concerning the country’s international investment are not published and hard to come by.
Lack of security and the freezing of the country’s international assets by the UN during the revolution, which remains in force under resolution 1970 (2011), have led the country to its worst fiscal crisis since independence in December 1951. The crisis has been exacerbated by the transfer abroad of large amounts of hard currency during the revolution by members and supporters of the old regime and by those who subsequently took the reins of power. Dwindling hard currency reserves have led to significant drop in the value of the local currency, the Libyan Dinar (LD), resulting in hyperinflation and much suffering for ordinary Libyans.
As members of the two legislative bodies in the country, the General National Congress and the subsequently elected parliament have been enjoying benefits that the ordinary person in Libyan could only dream of, all local and international efforts to mediate between them have failed. The reason, it now appears, is that the two sides are in an informal agreement to maintain the status quo, because it serves their interests, which would be compromised if a formal agreement to get the country out of its crisis is reached.
International efforts to mediate between them, led by the UN’s appointed envoy to Libya in 2014 – 2015, the Spanish diplomate Mr Bernardino Leon, led to a fragile agreement between representatives of the two sides, and the different factions within them. The agreement, reached in December 2015, entailed the creation of a presidential council of five members headed by My Fayez Saraj, who was then a member of parliament representing a district in Tripoli. Mr Saraj was hand-picked by Mr Martin Kobler, the successor of Mr Leon from October 2015, because he saw in him an impartial figure in the dispute. In the event, he formed a government, which the parliament had subsequently rejected. Nonetheless, supported by international recognition, the government took office.
Fear of assassination, kidnapping and execution of politicians drove the government in Tripoli to rely on militiamen for the personal security of its members and for the security of its departments. This gave militia leaders a say in the running of the internal affairs of the country and enabled them to tap into the source of wealth by embezzlement and blackmail. Ironically, amongst the duties that some militia granted themselves has been the guarding of banks. This, coupled with lack of clear strategy by the government for combating the fiscal crisis caused traders and the public alike to lose confidence in the banking system. They therefore resorted to keeping their cash away from the banks, refusing to accept methods of payment other than cash. Accepting a payment by a bankers’ cheque could see the customer paying as much as 100% over and above the price tag of a product.
With traders refusing to deposit their monies in the banks, cash flow in the banks became a one-way traffic— from banks to customers. This had the effect of drying up liquidity in the banks. Consequently, people began to queue up, sometimes sleeping rough for days outside banks to withdraw their money. Moreover, access through the door of a bank following a delivery of cash could see them paying a levy from their withdrawals to militiamen guarding the entrance. The plight of the people has been made worst by lack of essential services, most significant is the lack of health care and education. Well to do people travel abroad for medical treatment and send their children to study abroad. With the methods of payment restricted to cash, the well to do are not necessarily the rich per se. Only the cash-rich, whose money is kept in their own safes can afford to spend. They are the only ones who can buy hard currency and travel abroad.
Hard currency in Libya is traded in the so called parallel market, which started as a black market during Kaddafi’s era, motivated by tight restriction on hard currency supply from the banks. In Kaddafi’s later years in power, and perhaps in preparation for the opening of a stock market, officials began to refer to it as the parallel market, perhaps as a first step to legitimising it. The name implies that it is not in direct competition with the banks, but an alternative to them. Ironically though, the name is most appropriate for an unintended reason. Being parallel to the banks, it facilitated the syphoning by unscrupulous traders of hard currency from the banks into the market via a back door.
It is understood that the main currency traders enter the market through that back door. Officially, they are businesses operating as government importation agents brining in essential goods and services, some of which are subsidised by the state. Having the necessary approval, a mandate, they can buy the dollar from the banks at a preferential rate (the official rate), which was until recently about LD1.30 to the dollar. However, instead of importing what they were hired for, they cash-in their letters of credit in foreign countries and bring the money back into the country in hard currency to sell to buyers in the parallel market at exuberant rates. Thus, realising super profits effortlessly. Containers arriving in the country's ports were found to be empty.
With tight restriction on the exchange of hard currency to the public in the banks, those traders found themselves operating a cartel, monopolising a lucrative market in which the buyers are desperate. As local currency has no value outside the country, people travelling abroad must get their hands on hard currency before leaving. Those are mainly people who need to travel abroad for medical treatment or to send money to their children studying abroad. These two groups are most desperate and suffer worst financial losses in the process of currency exchange, because of the high cost of these services— health and education.
Since the revolution in February 2011, which saw NATO’s unprecedented intervention, the country has descended into chaos. With different countries backing different individuals, groups and political parties that were thought to serve their interests, they set them against one another. Initially, Qatar and Turkey backed those known for their religious ideology, while Egypt and the Golf States backed groups calling for civil society. This latter group has been accused by the former of being ‘secular’. A word which in Arabic is considered synonymous with infidel. In Europe, Italy and France have backed rival factions, and of late the two countries have been more open in supporting them. More recently the situation has become more fluid and complicated, as some individuals and groups changed sides and new alliances have formed.
The breakout of civil war in 2014, was initially sporadic and intermittent, with various factions fighting for the control of different parts of the country. However, it has resulted in significant drop in oil production, which is Libya’s only source of revenue. Although the country has major international investment, information about the income from it was shrouded in secrecy by the Kaddafi regime, and has remained so even after the revolution. According to some recent British newspaper reports, much of that investment is being squandered by agents of the Libyan Overseas Investment Company. Reliable information concerning the country’s international investment are not published and hard to come by.
Lack of security and the freezing of the country’s international assets by the UN during the revolution, which remains in force under resolution 1970 (2011), have led the country to its worst fiscal crisis since independence in December 1951. The crisis has been exacerbated by the transfer abroad of large amounts of hard currency during the revolution by members and supporters of the old regime and by those who subsequently took the reins of power. Dwindling hard currency reserves have led to significant drop in the value of the local currency, the Libyan Dinar (LD), resulting in hyperinflation and much suffering for ordinary Libyans.
As members of the two legislative bodies in the country, the General National Congress and the subsequently elected parliament have been enjoying benefits that the ordinary person in Libyan could only dream of, all local and international efforts to mediate between them have failed. The reason, it now appears, is that the two sides are in an informal agreement to maintain the status quo, because it serves their interests, which would be compromised if a formal agreement to get the country out of its crisis is reached.
International efforts to mediate between them, led by the UN’s appointed envoy to Libya in 2014 – 2015, the Spanish diplomate Mr Bernardino Leon, led to a fragile agreement between representatives of the two sides, and the different factions within them. The agreement, reached in December 2015, entailed the creation of a presidential council of five members headed by My Fayez Saraj, who was then a member of parliament representing a district in Tripoli. Mr Saraj was hand-picked by Mr Martin Kobler, the successor of Mr Leon from October 2015, because he saw in him an impartial figure in the dispute. In the event, he formed a government, which the parliament had subsequently rejected. Nonetheless, supported by international recognition, the government took office.
Fear of assassination, kidnapping and execution of politicians drove the government in Tripoli to rely on militiamen for the personal security of its members and for the security of its departments. This gave militia leaders a say in the running of the internal affairs of the country and enabled them to tap into the source of wealth by embezzlement and blackmail. Ironically, amongst the duties that some militia granted themselves has been the guarding of banks. This, coupled with lack of clear strategy by the government for combating the fiscal crisis caused traders and the public alike to lose confidence in the banking system. They therefore resorted to keeping their cash away from the banks, refusing to accept methods of payment other than cash. Accepting a payment by a bankers’ cheque could see the customer paying as much as 100% over and above the price tag of a product.
With traders refusing to deposit their monies in the banks, cash flow in the banks became a one-way traffic— from banks to customers. This had the effect of drying up liquidity in the banks. Consequently, people began to queue up, sometimes sleeping rough for days outside banks to withdraw their money. Moreover, access through the door of a bank following a delivery of cash could see them paying a levy from their withdrawals to militiamen guarding the entrance. The plight of the people has been made worst by lack of essential services, most significant is the lack of health care and education. Well to do people travel abroad for medical treatment and send their children to study abroad. With the methods of payment restricted to cash, the well to do are not necessarily the rich per se. Only the cash-rich, whose money is kept in their own safes can afford to spend. They are the only ones who can buy hard currency and travel abroad.
Hard currency in Libya is traded in the so called parallel market, which started as a black market during Kaddafi’s era, motivated by tight restriction on hard currency supply from the banks. In Kaddafi’s later years in power, and perhaps in preparation for the opening of a stock market, officials began to refer to it as the parallel market, perhaps as a first step to legitimising it. The name implies that it is not in direct competition with the banks, but an alternative to them. Ironically though, the name is most appropriate for an unintended reason. Being parallel to the banks, it facilitated the syphoning by unscrupulous traders of hard currency from the banks into the market via a back door.
It is understood that the main currency traders enter the market through that back door. Officially, they are businesses operating as government importation agents brining in essential goods and services, some of which are subsidised by the state. Having the necessary approval, a mandate, they can buy the dollar from the banks at a preferential rate (the official rate), which was until recently about LD1.30 to the dollar. However, instead of importing what they were hired for, they cash-in their letters of credit in foreign countries and bring the money back into the country in hard currency to sell to buyers in the parallel market at exuberant rates. Thus, realising super profits effortlessly. Containers arriving in the country's ports were found to be empty.
With tight restriction on the exchange of hard currency to the public in the banks, those traders found themselves operating a cartel, monopolising a lucrative market in which the buyers are desperate. As local currency has no value outside the country, people travelling abroad must get their hands on hard currency before leaving. Those are mainly people who need to travel abroad for medical treatment or to send money to their children studying abroad. These two groups are most desperate and suffer worst financial losses in the process of currency exchange, because of the high cost of these services— health and education.
In addition to market traders, who have access to hard currency for importing goods and services, a new group of traders have entered the market. Attracted by what is seen as continuous upwards trend in the value of the dollar, increasing number of cash-rich individuals, who profited from the revolution in one way or another, began to see the opportunity for making a quick profit. So, they entered the currency market as speculators. This group of investors have fuelled the market by increasing demand, adding to the increase in the value of the dollar.
Bankers have been accused by the public in of being in on the act by issuing letters of credit to approved government importation agents with the view of sharing the profit from currency sale with them. More recently, it is claimed that militia leaders have also joined the feast, demanding letters of credit, by force when necessary, to act as agents for the importation of goods and services. In recent days battles in and around Tripoli have raged between various militias and some commentators have termed these battles as the battles of mandates, in reference to government mandates and the banks issuing of letters of credit to importation agents.
In the last three years the price of the dollar on the black market has jumped from DL1.25 to over DL9.0. It has since dropped slightly following roamers that the Central Bank will be placing a few billion dollars on sale to the public soon. However, with bankers and militia leaders are controlling the market, it is in their interest to maintain the dollar fluctuating while controlling the trends, so that they lower the price to buy what’s on offer from the banks and speculators, then raise it to sell to the public and to the speculators.
Now, people’s hopes of a government establishing anything that resembles a democratic state have faded, as they find themselves living in a lawless society fearing descend into open anarchy, suffering insecurity and facing shortages of power, fuel, food and water, topped up with hyperinflation, not to mention the lack of proper health service and education. With robberies, carjacking and kidnapping people for ransom, which were unheard of during the Kaddafi era, all that people wish for now is some normality in their lives.
With streamlined interests of politicians, bankers and militia groups, what could the people do to break that alliance and free themselves from tyranny, which dwarfed that of Kaddafi’s?
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