Strategic Priorities for the Central Bank of Libya

With discussions surrounding the appointment of a new Board of Directors for the Central Bank of Libya, the focus turns to the strategic priorities that the board must set to ensure financial and economic stability in the country. This phase is crucial given the economic challenges Libya faces, including inflation, fluctuating exchange rates, and the management of foreign reserves, in addition to the unstable political situation.

In language simplified as much as possible so that everyone can understand, considering that the Central Bank of Libya and its management have transcended the level of authority and the elite to become a national concern that has captured everyone’s attention, I summarize the priorities of the new administration as follows:

1. Restoring Confidence in the Financial System:

One of the most prominent priorities for the new Board of Directors is to restore confidence in the Libyan financial and banking system. This is essential for rebuilding the economy and attracting foreign and local investments. The board must work to enhance transparency in managing public funds, ensure that monetary policies align with national economic objectives, and top this priority by ensuring the equitable distribution of wealth and development across all of Libya.

2. Unifying Monetary Policy:

After years of political and economic division in Libya, it is crucial to unify monetary policy at the state level. The new Board of Directors must coordinate between the different branches of the Central Bank of Libya in Tripoli and Benghazi to ensure that the monetary policy is coherent and consistent, and that the banking system is unified. This step will be vital in achieving economic stability and boosting investor confidence.

3. Addressing Inflation and Exchange Rates:

Inflation and rising exchange rates are among the biggest challenges facing the Libyan economy. The new board should work on developing policies aimed at stabilizing prices and strengthening the value of the Libyan dinar. This can be achieved through the use of monetary policy tools such as setting interest rates (taking into account the specific nature of the Libyan case), addressing the levy imposed on foreign currency (respecting judicial rulings in this regard), enhancing foreign currency reserves, improving the management of foreign currency flows in the market, and addressing the non-objective restrictions imposed on citizens and companies access to foreign currency.

4. Effectively Managing Assets and Foreign Reserves:

Foreign reserves are a cornerstone of economic stability. The new board must establish well-crafted strategies to manage these reserves professionally and transparently, ensuring that the future needs of the Libyan economy are met and financial sustainability is achieved. These strategies should include asset diversification, maintaining adequate liquidity levels, ensuring safe and profitable investments, considering investment risks, and adhering to the credit ratings of the banks dealt with.

5. Improving Access to Banking Services:

Increasing access to banking services across Libya is an important challenge. The new board should focus on enhancing banking infrastructure in underserved areas, as well as promoting financial inclusion through innovative channels such as mobile banking. This is in addition to the primary banking services that citizens struggle to access, such as liquidity, opening accounts, issuing checkbooks, international transfers, and more.

6. 6. Strengthening Oversight and Financial System Safety:

Strengthening regulatory systems on banks and other financial institutions is vital to ensure financial stability. The new board should work on updating regulatory systems and applying international standards to ensure the safety of the banking and financial system, reduce risks, and ensure that banks and international institutions fulfill their national and international obligations regarding anti-money laundering and combating the financing of terrorism.

7. Supporting Economic Diversification:

Although the Central Bank of Libya is not the sole entity responsible for economic diversification, its role in supporting this goal is pivotal. The new board should cooperate with the government and other institutions to provide a favorable environment for the development of non-oil sectors by offering financial facilities and support for small and medium-sized enterprises, and the banking sector should resume its role in financing and lending.

8. Enhancing International Financial Relations:

Given the significant economic challenges facing Libya, the new board must work to enhance relations with international financial institutions such as the International Monetary Fund (IMF) and the World Bank, particularly by continuing to conduct Article IV consultations with the IMF and implementing the recommendations of previous consultations, as well as strengthening cooperation with friendly countries to support economic stability, attract investments, and improve the international reputation and confidence in the Libyan banking and financial sectors.

9. Imposing a Governance, Disclosure, and Integrity Approach:

At the Central Bank of Libya and the level of commercial banks, the importance of imposing a governance approach that has been absent in recent years stands out. The top priorities of governance include making decisions within a complete Board of Directors that meets regularly and operates through committees such as the investment, risk, audit, and appointments committees, adhering to the preparation of consolidated annual financial statements in accordance with international accounting standards, reviewing financial statements by a neutral authority, disclosing the annual performance report, periodically disclosing revenue and public expenditure, establishing a system that prevents conflicts of interest, adopting advanced policies for investment, risk, audit, and appointments, developing the organizational structure, and setting up a system for accountability and reporting of misconduct. These are priorities that must be adhered to at both the Central Bank and commercial bank levels.

10. Ensuring the Independence of the Central Bank of Libya and Keeping it Out of Political Polarization:

It Is time for the Central Bank of Libya to return to its mandated role as an independent monetary authority focused on supporting the national economy, strengthening the Libyan dinar, and utilizing its resources to ensure the provision of appropriate services to citizens and companies. The bank should also act as a key partner in supporting the oil and gas sector—the sole source of the national economy—to increase production and export rates. Furthermore, it should serve as the top economic advisor to the executive authority by providing scientific advice based on numbers, tables, and performance indicators, far removed from political agendas and regional polarization.

In conclusion…

The success of the new Board of Directors of the Central Bank of Libya remains contingent on its ability to effectively address these strategic priorities. There is no doubt that the challenges are significant, including the legacy of previous years and the inherent fragility of our national economy, which relies solely on oil. However, there are also opportunities to achieve sustainable financial stability and support economic development in Libya. With effective management, well-considered decisions, and communication and coordination with all national parties without exception, the new Board of Directors can play a pivotal and historic role in shaping a more stable and prosperous future for the country and a more dignified and secure life for the citizens.

 Mustafa Al-Mana

Libyan expert in law and economics, has worked as a national and international lawyer, and a member of the Board of Directors of the Libyan Investment Authority, and the Board of Directors of the Libyan Foreign Bank. He has also served as an advisor to several national and international institutions and has worked in several foreign banks in Spain, the United Arab Emirates, Morocco, Egypt, and African countries. He has represented Libya in meetings of the International Monetary Fund and the World Bank, led the team to establish the African Investment Bank affiliated with the African Union, and served as an expert and trainer with the American Bar Association. He also worked as an advisor to the Sovereign Fund of the Sultanate of Oman.