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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Libyan politicians’ immediate priority should be to implement the preliminary deal signed on 26 September. The House of Representatives and High State Council, as well as the Presidential Council, should all do everything in their power to allow the new appointee Naji Issa to take over as Central Bank head and allow for establishing a board of directors. The board should be an active one, charged with enhancing the institution’s transparency and accountability. Oil production across the country should also resume.
Reaching a preliminary deal was by no means an easy feat. Talks to resolve the crisis began on 2 September, hosted by the acting head of the UN Support Mission in Libya, Stephanie Koury, at the UN headquarters in Tripoli. She envisioned them as trilateral consultations among representatives of the Presidential Council, House of Representatives and High State Council aiming “to reach a consensus based on political agreements, applicable laws and the principle of the Central Bank’s independence”.
But the two assemblies’ representatives refused to negotiate directly with the Presidential Council’s emissaries, and the latter were relegated to a separate room. As late as 23 September, two rounds of talks had produced no agreement. But informal conversations among key figures reportedly continued. On 25 September, quite suddenly, according to UN sources, the delegations informed the UN that they had reached an agreement on new management, asking Koury to host a signing ceremony the following day.
This initial agreement between the two rival assemblies is not a done deal, and as noted above, much could still go wrong. A first priority should be to ensure that the Presidential Council also backs the new appointments and is ready to revoke its controversial August decree.
The two assemblies’ refusal to sit with Presidential Council representatives during the UN consultations is hardly surprising. The House of Representatives stopped recognising the Dabaiba government in 2022 and recently threatened to do the same with the Presidential Council.
Their strategy in the talks could well have been to buy time to let the economic crisis hit in the hope that public opinion will turn against the Dabaiba government, which they blame for triggering the dispute. As for the High State Council, its new acting (but still contested) president, Khaled Mishri, likely wished to keep the Presidential Council out of the picture so as to deal directly with the House speaker, Aghela Saleh, which is what the two assemblies have done in the past.
The fact that the two assemblies signed this preliminary agreement does not mean that they have given up on undermining the Dabaiba-led government.
The fact that the two assemblies signed this preliminary agreement does not mean that they have given up on undermining the Dabaiba-led government. Yet, with a deal now on the table, the leaders of the two assemblies would be ill-advised to proceed without ensuring that the Presidential Council and Prime Minister Dabaiba are on board.
Although the UN-backed procedure for selecting the Central Bank head has since 2015 required only the two rival assemblies’ consent, in the current fractured political set-up the Presidential Council’s buy-in is crucial for reaching a stable agreement and preventing an economic meltdown. Broad consultations that include all major institutions are essential for reaching consensus on how to resolve the dispute. Keeping the Presidential Council out risks encouraging it to become a spoiler.
Furthermore, as foreign officials have clearly stated, the Presidential Council’s buy-in is a prerequisite for international financial institutions to consider the dispute over the Central Bank’s leadership closed and to unlock suspended transactions with Libya. For that to happen, all parties would need to recognise the same person as interim governor, and the Presidential Council would need to explicitly revoke its August appointments.
A second priority is to ensure that the House of Representatives officially ratifies the appointment in accordance with Libyan law and the Libyan Political Agreement. On several occasions in the past, members of the House have reached preliminary political deals with their rivals, only to see Saleh or the House as a whole renege at the last minute.
This time, members of the House should collaborate in good faith to finalise as quickly as possible their endorsement of the new governor and a board. Once the House ratifies these arrangements, a peaceful, legally valid handover of the Central Bank will need to take place to avoid any further disputes regarding the new management.
For the UN, meanwhile, this crisis represents an opportunity to reset its negotiating approach to Libya by adding economic and financial discussions to existing political talks. Between 2018 and 2021, the UN was actively engaged in mediating budgetary disputes and other economic and financial disagreements. In 2020, it even integrated a separate economic track into the diplomatic framework, alongside the political and military ones.
These talks included some of the feuding financial institutions’ representatives, as well as bankers, economists and other competent experts. But since 2022, successive UN envoys have neglected economic issues in favour of political discussions. The Central Bank crisis is a powerful reminder that the fight over finances is an integral part of the overall conflict and has huge repercussions for people’s well-being. Yet UN-led talks have stalled for over a year, and since UN Special Representative Abdoulaye Bathily resigned in April there has been no permanent envoy for Libya.
The UN Secretary-General should appoint a new Libya special representative, whose active mediation efforts Libya sorely needs. Should naming a new envoy prove impossible, due to divisions within the UN Security Council, the Secretary-General should appoint the interim head, Koury, as acting special representative, a step up from her current role as “officer in charge”. He should make this move before the next UN mission mandate renewal vote, which is due before the end of October.
Time is of the essence in resolving Libya’s Central Bank dispute. If the preliminary deal signed on 26 September falls through and the feud between rival authorities continues, outside partners will continue to keep Libya disconnected from international financial markets, aggravating the risks of an economic collapse.
Although a limited number of foreign financial transactions are still taking place, a prolonged cutoff could take a devastating toll in Libya, a country which is almost entirely dependent on oil revenue to cover government expenses and which imports virtually all its essential needs, including foodstuffs and construction materials.
Reaching a preliminary accord to settle this dispute is a major achievement, but the wrangling over the Central Bank is far from over. That said, rival factions have a shared interest in avoiding a sharp deterioration in living conditions, which could trigger popular protest or violent unrest.
They should now work in good faith and, with the UN’s help, aim to implement the deal by allowing the new governor to take over the Central Bank and appoint board members. Reconnecting Libya to global financial circuits is crucial, but it should happen only through arrangements that include all the country’s main political forces and respect agreements that have already been struck.
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