The long-running feud between Libya’s competing authorities over the Central Bank has flared up again, threatening an economic crisis that could lead to unrest. The parties should press ahead with UN-backed mediation to achieve a resolution.
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II. The Struggle for Control of the
Central Bank
Disputes over control of the Central Bank have been a recurring feature of the Libyan crisis since the country’s governing institutions split in two in 2014. After balloting in June of that year, Siddiq Elkebir, with the backing of the Tripoli-based authorities, refused to fund the newly elected House of Representatives, the legislature that from its inauguration has been based in eastern Libya.
He also cut off financing to the House’s two main allies, the then-nascent Libyan National Army led by Haftar and a new east-based administration. He did, however, keep releasing funds to pay the salaries of public-sector employees based in the east who had been on the state payroll from before the 2014 crisis (paradoxical as it may sound, these employees included military officers aligned with Haftar).
In the years that followed, the House of Representatives tried and failed to sack Elkebir at least twice. In 2014, it ordered Elkebir’s deputy, Ali Hibri, to take over, working from the Central Bank’s Benghazi branch.
But Hibri did not receive international recognition and did not have access to the foreign accounts holding Libyan oil revenues. He nonetheless managed to pay the salaries of employees working for the rival east-based authority who were hired after 2014 and new recruits who had joined the Libyan National Army, as well as their respective operating expenses, through parallel funding schemes, such as purchasing treasury bills from the eastern administration and then crediting its deposit account. But Elkebir remained in charge overall, since he controlled the accounts containing the proceeds of oil sales as well as the codes needed to carry out the Bank’s transactions worldwide. He also retained full international support.
Appointments of the Central Bank … require consensus between the House in the east and the High State Council in Tripoli.
The House of Representatives tried to depose Elkebir a second time in 2017, unilaterally appointing Mohammed Shukri as governor, but the latter declined the role, citing the lack of consensus behind his selection. Shukri knew that his appointment ran afoul of existing political accords. The UN-backed Libyan Political Agreement, which the UN Security Council endorsed in December 2015 after a year of negotiations and which remains the country’s governing document to this day, established that appointments of the Central Bank governor and directors of five other sovereign state institutions require consensus between the House in the east and the High State Council in Tripoli.
The High State Council rejected the House’s appointment of Shukri because its members at the time still supported Elkebir, as did armed groups in the capital. Later in 2017, the two legislatures took tentative steps to replace Elkebir, whose five-year term had expired and who had proven divisive, but their representatives could not agree on who his successor should be.
Between 2018 and 2020, Libya’s political crisis descended into intermittent fighting, amounting to civil war. The Libyan National Army, backed by the United Arab Emirates and Egypt, on one side, and the Tripoli-backed armed groups with Turkish support on the other clashed in the eastern cities of Benghazi and Derna, as well as in the south and over oil fields in the Gulf of Sirte.
In 2019, the war reached Tripoli, with Haftar’s forces, now also assisted by Russian mercenaries, laying siege to the capital for over a year. This westward drive was partly an attempt by the eastern authorities to gain direct control of the Central Bank and access to its accounts, including its foreign currency reserves. When the offensive faltered in 2020, the Libyan National Army returned to its base in the east.
Throughout this period, Elkebir remained at the helm of the Central Bank by default. The Tripoli headquarters operated without a functioning board of directors, because most members sided with the east-based government. The governor, flanked by trusted managers, thus became the sole person responsible for Libya’s monetary policies. The east-based authorities regularly vilified him, portraying him as a pawn of their enemy the Muslim Brotherhood. They accused him of mishandling public funds and thus contributing to an economic crisis. They also said he was running the bank illegally without a board of directors.
Even though Libya continued to sell billions of dollars’ worth of oil, ordinary people increasingly had to cope with shortages of cash and fuel, power cuts and breakdowns in other public services. These problems have only become worse today. Libyans have also had to bear delays in the disbursement of public-sector salaries and rely on the black market for foreign money transfers, because personal bank accounts have been disconnected from the international banking system.
Those in power on both sides of the divide have blamed Elkebir for the hardships, as have many ordinary Libyans. Elkebir and his associates argue that, to the contrary, under his leadership the Central Bank has been “the last pillar standing to hold the country together, solely responsible for keeping its economy going”.
In March 2021, UN-backed talks ended hostilities and briefly unified the country under an interim government led by Prime Minister Dabaiba and a three-man Presidential Council headed by Mohamed Mnefi, which the House of Representatives endorsed.
This arrangement lasted barely a year, falling apart when the House appointed its own executive, led first by Fathi Bashagha and then by Osama Hamad, while Dabaiba and the High State Council held on to power in Tripoli.
After 2022, however, relations between Elkebir and the east-based authorities unexpectedly improved. Exactly why remains unclear. Libyan bankers and foreign diplomats suggest that the thaw had to do with the Central Bank allegedly agreeing to underwrite (or turning a blind eye to) some of the east-based authorities’ expenses processed through east-based banks, which Elkebir had not done previously.
Some of Elkebir’s Tripoli-based opponents also claim that he funded the eastern authorities, an accusation the ousted governor vigorously denies: “Dabaiba tells militias that Siddiq gave billions to the east, but where is the evidence?”, he remarked in an interview with Crisis Group.
The governor stated that he never gave any direct funding to the parliament-backed authority, which he said had financed itself since 2022 through public debt, referring to the parallel funding schemes that eastern authorities had used between 2014 and 2019.
Once the eastern authority had warmed to Elkebir, the Central Bank also started funding reconstruction projects in the east.
Once the eastern authority had warmed to Elkebir, the Central Bank also started funding reconstruction projects in the east. In the first half of 2024, it allocated $950 million for “Eastern Province Reconstruction Projects Credits” that, according to the Bank’s internal reporting, were transferred to its Benghazi branch and managed directly from there.
Elkebir acknowledged the transfer of this money, but said it was not “funding” for the eastern authorities but rather the Bank’s commitment to cover purchases in foreign currency that were necessary for reconstruction; these purchases, he said, would be paid for by eastern authorities in local currency.
The wording of this allocation would appear to suggest that these funds were put at the disposal of the Libya Reconstruction and Development Fund, which the House of Representatives created in late 2023 and is headed by one of Haftar’s sons, Belghasem. The Central Bank’s documents are unclear, however, on whether all the allocation went to the Fund or if some of it headed to other reconstruction projects in the east.
Efforts to build a bridge between the two rival governments based on shared economic interests extended to the state-owned National Oil Corporation, which manages crude oil sales and refined fuel imports. In mid-2022, a UAE-facilitated and U.S.-backed agreement between Haftar and Dabaiba paved the way for appointing Farhat Bengdara, a Haftar ally and former Central Bank governor under Qadhafi, to head the company. The deal’s terms were never made public, but diplomats and Libyan politicians say eastern authorities committed to keeping the oil fields and terminals open, under the Libyan National Army’s control, in exchange for receiving a specified portion of the oil revenues accruing in the Central Bank.
The deal’s main negotiators, who also oversaw its execution, were Saddam, another son of Haftar’s, and Ibrahim Dabaiba, the prime minister’s nephew and one of his advisers. Foreign countries also backed it, in the belief, as a U.S. official said, that if “you patch together enough economic stability in Libya, maybe a political solution will come through”. But there was no breakthrough.
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