Wolfram Lacher
“Ibrahim’s commitments to Haftar, Saddam, Ghnewa [a powerful Tripoli militia leader] go far beyond what Siddiq [Kabir] agreed on,” a senior financial official close to Kabir told me last December.
But there is another narrative of how Kabir and the Dabeibas fell out, one of political intrigue between power brokers who install and eject senior officeholders to pursue their private ends through Libya’s state institutions. Ibrahim Dabeiba’s power politics, this narrative goes, had begun to directly threaten Kabir months before he rang the alarm bells on expansionary spending. In July 2023, two militia leaders closely allied with Ibrahim had enabled a new appointee to take over at the Administrative Control Authority — a position that offered its holder veto power over public sector appointments and contracts.
“When that happened, Siddiq [Kabir] started worrying about his own post,” a senior financial official said. The previous incumbent, Tripoli militia leaders and senior officials agree, had been beholden to Mohamed Taher Issa, a prominent businessperson with close ties to Kabir. Previously, Issa had staunchly backed Prime Minister Dabeiba in his bid to retain the loyalties of armed groups in Tripoli. But following the change, Issa assembled a coalition aimed at ousting Dabeiba.
In the same month, a former finance minister was arrested on arrival in Tripoli, where he sought to rally the support of parliamentarians for his bid to replace Kabir at the central bank — apparently backed by both Ibrahim Dabeiba and Saddam Haftar. To protect himself against Ibrahim’s scheming, Kabir built his own alliances with eastern factions. He solicited the support of Agila Saleh, the head of Libya’s east-based Parliament, which had previously considered Kabir an impostor whose term as governor had expired long ago. Only weeks after the incident involving the former finance minister, Kabir obtained a decree from the Parliament’s presidency confirming his position as well as that of his east-based deputy Marei Barassi — another key official who owed his appointment to Haftar’s sons. The decree handed Kabir and Barassi the competencies nominally held by the central bank’s board of governors, requiring them to work closely together.
In the autumn, Kabir began blocking first the transactions of Ibrahim’s political clients and then capital and operating expenditure more broadly, saying that the money for 2023 had run out. Eventually, two militia leaders close to Ibrahim threatened Kabir directly, according to two senior officials close to him. “This crossed the line for him,” one of them said. Shortly afterward, in early November, Kabir left for Turkey, where he was involved in a car accident. Rumors quickly swirled that it had been an attempt on his life. Whatever the truth, Kabir stayed in Turkey for over a month, ostensibly for medical treatment.
All the while, he blocked payment authorizations for Dabeiba’s administration. Politicians and militia leaders in Tripoli believed that Kabir was trying to bring Dabeiba down. Tensions were building up between two emerging militia alliances in Tripoli, one of them backing Dabeiba, the other now looking to Kabir as Dabeiba’s leading opponent. Kabir’s ally Mohamed Taher Issa was holding meetings to rally support for a change in government. The dinar’s rate against foreign currencies was sliding on the black market.
In the early months of 2024, Dabeiba’s financial travails kept worsening, while the Haftar family and its east-based government suddenly became awash with money. “The Haftars used to negotiate with us over a billion here, a few hundred million there. Now they no longer ask for anything, they have more than they need,” a senior financial official told me this June.
The most important reason for the dinar’s slide was that the Haftar clan was printing money both figuratively and literally, as well as converting that money into hard currency on the black market, boosting the demand for dollars. In public, both Kabir and Dabeiba referred to this as “the parallel expenditure of unknown origin.” Kabir argued that the threat to Libya’s economy from parallel spending made it necessary to negotiate a unified budget between both administrations. In fact, Kabir himself was facilitating the eastern authorities’ financing mechanisms.
In the final months of 2023, rivalry between the two governments obstructed the response to the catastrophic flooding in the city of Darna. In September, the collapse of two dams after torrential rains devastated large parts of the city’s center. More than 4,000 people died; another 8,000 are still considered missing.
Libya’s factions characteristically seized on the disaster as an opportunity to get ahead of their competitors. On paper, Dabeiba decreed 2 billion dinars (then around $400m at the official exchange rate) for the emergency response and reconstruction; the east-based Parliament allocated five times that sum to the parallel government.
But Dabeiba’s government had no presence in Darna, while the parallel administration had no regular access to funding from the central bank. Meanwhile, Kabir insisted that reconstruction had to be overseen jointly and with the involvement of the World Bank to ensure transparency. For months, the impasse kept reconstruction on hold, even as more than 40,000 people remained displaced from their homes.
Saddam Haftar had overseen the initial response to the crisis, while his brother Belgasem became head of the eastern government’s Darna reconstruction committee in December 2023. Initially, Belgasem had little to show for it. Two months later, however, the east-based Parliament transformed the committee into a reconstruction and development fund for the whole of Libya, and exempted it from all administrative and financial oversight.
Shortly afterward, the sluggish work of clearing damaged or illegally built structures in Darna gave way to frantic construction activity. And it was no longer just Darna. Egyptian and Turkish companies began building roads, bridges and buildings in Benghazi and other cities.
It is unclear where the money for this sudden boom came from. Belgasem Haftar has told journalists that the funding for the projects he oversees comes from the central bank. Western diplomats also believe the central bank in Tripoli has financed the eastern government, though they lack specifics. Several senior financial officials in Tripoli equally claimed that the central bank had made direct transfers, including to Belgasem’s fund. But the central bank itself, which publishes detailed data on the disbursements it authorizes, did not declare any such payments.
In August, the Tripoli central bank for the first time acknowledged that the Benghazi central bank had used $950m for construction projects in the east, but it did not say where the dinar equivalent of that amount had come from. A close adviser to Kabir repeatedly denied to me that the central bank had made transfers to Belgasem’s fund or other arms of the eastern government. This could change after the east-based Parliament in July 2024 adopted a unified budget shared between the two parallel governments, as Kabir had proposed. But at the time of writing, Kabir and the Parliament are still at odds over the budget, which apparently does not correspond to Kabir’s expectations.
Three senior financial officials offered an alternative explanation for the bonanza — one that suggested a less direct flow of funds from the central bank, but nevertheless one ultimately overseen by Kabir. In the decree Kabir obtained from the Parliament’s presidency to protect his position, he committed to transferring assets held by commercial banks in the parallel central bank’s accounts in Benghazi to those of the central bank in Tripoli, and allowing the banks to use them. These assets, worth a total of around 51 billion dinars (or around $10bn at the official exchange rate), represented the bulk of the debt previously accumulated by the eastern authorities.
Since 2015, banks headquartered in the east, under pressure from Haftar’s forces, had disbursed money at the behest of the eastern authorities, in exchange for treasury bonds. The eastern central bank then nominally purchased these bonds, and in return credited banks with assets in its accounts. These assets were purely hypothetical, because the eastern central bank had no access to revenue. By the time Haftar launched his offensive on Tripoli, in 2019, this financial wizardry had brought the east-based banks to the brink of bankruptcy, and the eastern central bank ended it. The assets, which banks were unable to draw on, remained an unresolved problem.
Kabir had already begun crediting east-based banks for part of these assets in early 2023, while he was still on good terms with Dabeiba. In June of that year, central bank officials told me that around $3.7 billion had been “transferred.” But after Kabir fell out with Dabeiba and reached out to the east, that operation accelerated, and by the end of the year, it was complete. In addition, the central bank extended billions in long-term, interest-free loans to banks. Board reshuffles brought east-based banks under the Haftars’ de facto control — banks that now had dozens of billions of dinars in assets in the account of the central bank in Tripoli.
This meant that the eastern government — and Belgasem Haftar’s fund — could once more take out debt from solvent commercial banks, with the help of the Benghazi central bank. Indeed, the law creating Belgasem’s fund explicitly authorized it to do so. Control over banks also allowed associates of the Haftar sons to officially buy hard currency on credit, then pay back the dinar equivalent after converting the hard currency on the black market, pocketing the differential.
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Wolfram Lacher is a senior associate at the German Institute for International and Security Affairs and the author of “Libya’s Fragmentation”
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