Libya's Central Bank Crisis Deepens: Impact on Economy and Daily Life

Libya faces chaos in its banking and financial systems due to a factional struggle over control of the Central Bank of Libya. This has resulted in transaction delays, unpaid salaries, and fluctuating exchange rates. The crisis exacerbates existing issues like liquidity shortages and fuel scarcity, significantly affecting citizens' lives.

In banks, shops, and businesses across Libya, confusion, fear, and snagged transactions reveal the immediate costs of a factional struggle for control over the central bank, which analysts say could get worse.

While the United Nations is holding meetings with rival political leaders to try to resolve the crisis, many ordinary transactions are impossible, and many state salaries remain unpaid, according to Libyans contacted by Reuters. 'We have transactions and payment deadlines with obligations that must be met on time, but the clearing system isn't working. If someone wants to receive money at a specific bank, the situation is currently unstable,' said Ahmed Sweilem, a stationery shop owner in Benghazi.

'If we want to withdraw dollars from the bank, ever since this issue began, there's been a crisis in transferring money. The exchange rate is unstable; it changes daily, with both bank and cash rates increasing. Most payment methods are facing issues,' Sweilem added. The crisis began when Presidency Council head Mohammed al-Menfi said he was dismissing veteran Central Bank of Libya governor Sadiq al-Kabir and appointing a new board - a decision reserved for legislative bodies under existing rules. Kabir rejected the move and was backed by eastern factions that have imposed a blockade on most oil production and export to pressure the government in Tripoli, in the west.

While the new board has been installed in the CBL building, Kabir appears to retain control over the bank's website. The new board asked Kabir last week to hand over the codes needed to carry out transactions. Western authorities have told banks to pay workers' salaries, but it is not clear if the CBL has managed to enable payments to state employees.

The crisis comes on top of existing problems. Libya has had a liquidity shortage for years, with both dinar and dollar banknotes difficult to obtain even for people with plenty of money in their accounts. An acute fuel shortage, blamed on a combination of smuggling, a shutoff at an oilfield supplying a major refinery, and external problems, has led to long queues at petrol stations.

'People are exhausted from waiting and enduring hardships. Of course, the citizens are struggling, everyone is affected by the fuel shortage. Trucks have to wait for two or three days,' said Mohammed Salem, a citizen of Misrata.

(With inputs from agencies.)