Wednesday, 9 June 2010

Questions over the current level of Libya's foreign reserves

A remarkable story is emerging which questions the degree to which Libya has assembled a large nest egg of foreign exchange funds that can be deployed in the development of the country's infrastructure. The current assumption, that many billions of dollars have been salted away by the Libyan Investment Authority (LIA), the Central Bank, and other state institutions, may be a miscalculation or, at best, somewhat exaggerated

The suspicion of problems with Libya's foreign exchange holdings arises from this week's temporary arrest of a group of senior officials on 5th June and subsequent release on 7th June into forms of house arrest. This isue first came to light earlier in the year when a former senior minister called for an assessment of Libya's losses through peculation and the mismanagement of state funds.

Three individuals, all occupying key posts, were currently alleged to have been detained for questioning. They are - the Chairman of the Central Bank, Farhat Omer ben Gadara; the Under Secretary of Finance, Ashour Khalifa Trebil; and the Prime Minister Al-Baghdadi al-Mahmoudi.

It is not clear whether the questioning of the prime minister was only directed at the problem of corruption or whether the involvement of his tribe - the Nuail who straddle the Libyan-Tunisian border - in the migrant labour industry and smuggling across the border to Tunisia were the main items of contention. If it is eventually confirmed that he has been engaged, with other members of the cabinet, in maladministration, then his position as prime minister would be at stake.

Initial information suggests that, of the US$140 billion of funds earmarked for the development of infrastructure in the plan to 2015, around US$60 billion has already been committed despite the requirements for the Plan's future years.

Doubtless the value of the missing assets has been greatly exaggerated because, although corruption is bad in contemporary Libya, it is not quite so bad as to enable such large sums of money to be creamed off the mainstream accounts held by government departments and banking institutions. There has also been no sign yet in the market place that Libya is paying accounts any later than usual and there has been little sign of holding back on investment by foreign companies.

For more news and expert analysis about Libya please see Libya Focus and Libya Politics & Security.

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