Debts pile up as rival Libyan governments struggle for power

A general view of the eastern Central Bank in Benghazi, Libya March 3, 2019. Picture taken March 3, 2019. (Reuters/Esam Omran Al-Fetori)
Updated 08 March 2019
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Debts pile up as rival Libyan governments struggle for power

  • The debt has been piling up since 2014, when the country split into two administrations — one in Tripoli and the other in the east
  • The United Nations has been trying to overcome Libya’s divisions but the rival camps have dug in, with the east setting up its own government ministries and oil company

BENGHAZI, Libya: Libya’s parallel government in the east has sold bonds worth more than $23 billion to fund its wage bill, bypassing the central bank in Tripoli and creating a potential financial black hole if the country reunifies, bankers and diplomats said.
The eastern government’s finance ministry has been selling the debt to a parallel central bank in the east and the proceeds of the sales are used to pay eastern state employees via local banks, in large part using dinars printed in Russia.
The debt has been piling up since 2014, when the country split into two administrations — one in Tripoli and the other in the east — as a result of the power struggle that followed the fall of Muammar Qaddafi in 2011.
The eastern government is backed by Khalifa Haftar, a general whose Libyan National Army (LNA) controls the east and has been deployed in the south since January, taking control of oilfields. The recent success of the LNA has led its supporters to urge Haftar to order his troops north to take Tripoli.
The United Nations has been trying to overcome Libya’s divisions but the rival camps have dug in, with the east setting up its own government ministries and oil company.
In Tripoli, the UN-backed authorities and central bank control an annual budget worth 40 billion dinars ($29 billion), but they only partly fund the east, mainly paying wages of public employees hired before 2014.
But since then, the east has hired thousands of soldiers as well as public servants to staff its new ministries.
To cover the wage bill and fund its army, which has just fought a three-year battle for control of Benghazi, the east has raised 32 billion dinars ($23 billion) since 2014 via bonds, bypassing Tripoli.
This year, bonds worth around 7 billion dinars will be issued, eastern central bank governor Ali Salim Al-Hibri told Reuters in an interview in Benghazi.
In order to charge annual interest of 3 percent on the bonds, the east suspended a general ban on such payments under Islamic law.
As the east is suffering a shortage of banknotes, its central bank has had 10 billion dinars printed in Russia — cash that has been used to pay wages and interest on the bonds, diplomats say.
The bonds are sold by the eastern finance ministry to its own central bank branch, now installed in a new building in Benghazi.
Inside, most desks have no computers or telephones, while some offices are empty as staff have little to do. Libya’s oil revenues and foreign reserves worth $80 billion are managed by the Tripoli central bank.
But there is little concern in Benghazi about how the eastern bonds will be paid back.
“The law allows me to delay payment of the principal for 15 years,” Hibri said. “So there is no problem.”
Diplomats are less relaxed, describing the bonds as a liability that Libya will have to cover once the two governments and banks unify under an eventual political deal.
Both central banks will be audited this year, part of a UN peace plan to unify the two branches.
“The east has sold bonds they don’t plan to settle. How do you value them in a future deal, at face value or less?” asked one Western diplomat.
He said trouble loomed for state banks that are paying public salaries as the central bank has used part of their deposits to pay interest on the bonds. They might struggle to pay private depositors, entrepreneurs say.
Hibri said he is considering starting a secondary bond market to raise 10 billion dinars from citizens and state bodies in the east, such as social insurance funds and banks.
The east has been spending 400 million dinars every month for public salaries and basic services, said Hibri.
On top of this comes up to 245 million dinars for the salaries of the Libyan National Army, which claims to have tens of thousands of soldiers. Diplomats say part of that money is used to buy equipment.
Military spending is set to increase since the LNA launched a southern offensive in January. Hibri said his bank had sent 82 million dinars in cash to supply banks in the main southern city of Sabha.
In a small reprieve for the east, Tripoli as agreed to public pay salaries from 2018 worth 177 million dinars a month, Hibri said.
Debt
The eastern debt comes on top of an estimated 65 billion dinars that the Tripoli authorities have piled up since 2014, turning to the central bank there to fund a welfare state and expensive public services.
This debt is covered by interest-free quasi loans from local banks to the central bank. Tripoli has also been printing money, this time in Britain.
Husni Bey, a prominent business leader, said borrowing in both west and east had added to the national debt, increased inflation and put local banks at risk.
Like the east, the Tripoli administration has been hiring since 2014, putting members of armed groups on the payroll in a vain attempt to buy loyalty.
University graduates have also been added, swelling the number of public servants in Libya to 1.8 million from little over one million in 2010, diplomats say.
There is little room for development as the budget is almost entirely spent on wages, fuel subsidies, funds for the state oil firm NOC and benefits such as medical treatment abroad.
As a result, Libya has launched no major infrastructure plan since 2011, leaving roads and hospitals in poor shape.
With no budget, most state bodies, especially in the east, do little real work. NOC east employs about 500 people in a Benghazi building but managers admit they have nothing to do as oil exports are handled by Tripoli.
“We are ready to work but we are waiting for orders,” said a bored-looking senior manager, sitting in a spacious office with an almost empty desk and a phone that never rings.
Worse, there is almost no budget to rebuild Benghazi and Derna, two eastern cities where whole districts were destroyed by fighting.
It will cost 50 billion euros to rebuild Benghazi alone, said Osama Al-Kaza, head of a reconstruction committee, showing a video of a futuristic city design with trams and artificial lakes.
“We only have a budget of 500 million dinars to restore basic services,” he said. “But the city is destroyed.”


Sudan’s military council, opposition coalition agree political accord

Updated 17 July 2019
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Sudan’s military council, opposition coalition agree political accord

  • The constitutional declaration is expected to be signed on Friday
  • The deal aims to help the political transition in Sudan

KHARTOUM: Sudan’s ruling military council and an opposition alliance signed a political accord on Wednesday as part of a power-sharing deal aimed at leading the country to democracy following three decades of autocratic rule.

The agreement, which ended days of speculation about whether a deal announced earlier this month would hold, was initialed in Khartoum in the presence of African mediators following a night of talks to iron out some details of the agreement.

Sudan’s stability is crucial for the security of a volatile region stretching from the Horn of Africa to Libya that is riven by conflict and power struggles.

The deal is meant to pave the way to a political transition after military leaders ousted former President Omar Al-Bashir in April following weeks of protests against his rule.

At least 128 people were killed during a crackdown that began when security forces dispersed a protest camp outside the Defense Ministry in central Khartoum in June, according to medics linked to the opposition. The Health Ministry had put the death toll at 61.

A political standoff between Sudan’s military rulers and protesters threatened to drag the country of 40 million toward further violence before African mediators managed to bridge the gap between the two sides.

General Mohamed Hamdan Dagalo, the deputy head of Sudan’s Transitional Military Council, hailed the agreement as the start of a new partnership between the armed forces, including the paramilitary forces he leads, and the opposition coalition of Forces of Freedom and Change (FFC).

Ibrahim Al-Amin, an FFC leader, said the accord signaled a new era of self-reliance for Sudan’s people.

“We want a stable homeland, because we have suffered a great deal,” Amin said in a speech after the ceremony.

Ethiopian mediator Mahmud Dirir said Sudan, long under international isolation over the policies of Bashir’s Islamist administration, needed to overcome poverty and called for the country to be taken of a US list of states that support terrorism.

The sides are still working on a constitutional declaration, which is expected to be signed on Friday.

Power-sharing deal

Under the power-sharing deal reached earlier this month, the two sides agreed to share power in a sovereign council during a transitional period of just over three years.

They also agreed to form an independent government of technocrats to run the country and to launch a transparent, independent investigation into the violence.

The power-sharing agreement reached earlier this month called for a sovereign council comprised of 11 members — five officers selected by the military council, five civilians chosen by the FFC and another civilian to be agreed upon by both sides.

The constitutional declaration will now decide the duties and responsibilities of the sovereign council.

The military was to head the council during the first 21 months of the transitional period while a civilian would head the council during the remaining 18 months.

But the agreement was thrown into doubt when new disputes surfaced last week over the military council’s demand for immunity for council members against prosecution.

The military council also demanded that the sovereign council would retain ultimate decision-making powers rather than the government.