Current Date: 28 May, 2024

Libya banking forum desires changes to combat inflation and recession

Reforms were immediately demanded at the 4th Annual Libyan Banking Sector Development Forum. According to a conference on Libyan banking, Libya needs drastic and quick economic reforms if it wants to escape the grip of stagflation.

The fourth Libya Banking Sector Development Forum began in Tunis, and a lot was said. Today, bankers and financiers all over the nation learned about the global recession and inflation that has affected them.

Libya banking forum desires changes to combat inflation and recession.

Covid, the war in Ukraine, and subsequent international uncertainties significantly impact the Libyan economy. However, due to the country's divisions, speakers at the forum warned that decisive action to combat inflation and recession was unlikely.

The Libyan economy, as the speaker pointed out, is not only not adaptive to what is happening in the rest of the world, but it is even more impacted than that of some other countries because it must import more than 80% of its goods and services and exports only one product.

The excessively high import ratio resulted in import inflation, particularly from China and Turkey, where it was noted that it is currently at 85 percent. Worse still, income is subject to fluctuations in oil and gas prices beyond the country's control.

Furthermore, in the case of the latter, export levels cannot be guaranteed due to intermittent export blockades. 

The Central Bank of Libya (CBL) deputy governor, Ali Hibri, based in Benghazi, stated that inflation in eastern Libya, where he serves as acting governor, has reached 90%.

According to speakers, all of this is having a negative economic impact on ordinary Libyans. According to Taher Jehaimi, former governor of Libya's Central Bank and planning minister in the previous Government of National Accord, people were complaining about rising prices. 

In addition, he said that no one was happy with their earnings, and businesses were complaining about a lack of demand, with some even closing down. As a result, he added, there were growing calls for a review of the exchange rate to boost the dinar's declining purchasing power.

Libya has few tools to combat inflation, unlike nations like the US and the UK, where interest rates have been used. Speakers discussed some potential solutions to Libya's stagflationary crisis. 

Speakers were nearly unanimous in their belief that Libyan government spending is excessive and should be reduced. In particular, salaries and subsidies in the public sector had to be reduced. 

There was also concern among the various speakers about the costs of the House of Representatives proposed minimum wage of LD 1,000 per month.

Speakers noted that more funding would be available for infrastructure and development spending by cutting spending, resulting in more homes and jobs.

Several speakers called for the repeal, or at least review, of Law 1 of 2013, which prohibits the use of interest in banking – even though one supportive delegate called it "one of the best laws" ever enacted in Libya. 

The first day of the forum's central theme was banking sector reform, and there was some criticism of the Tripoli-based CBL's attitudes. But, according to one speaker, banking sector reform must begin with the CBL. 

Responding to the World Bank's lead economist, Abdoulaye Sy's, list of priorities for the banking sector, which included rebuilding client trust in banks, addressing irregularities, and developing digital services, one speaker urged the CBL to have more confidence in commercial banks. 

He claimed that the CBL ignored the banking sector's calls for change. However, Mohamed Abusnina, an economic professor at Benghazi University who has spoken about the need to reduce government spending, address inflation, and create job opportunities, believes that the CBL is powerless to address banking sector issues due to internal divisions. 

Moreover, he thought it would be difficult to control inflation in the current situation, with the war in Ukraine and a sharp increase in agricultural imports.

Several reforms were proposed on the forum's first day, including establishing a property register so that bank clients could present commercially acceptable title deeds as collateral for loans.

Many of the suggested changes had been raised in previous banking forums. The most recent was in 2019, but many still need to be implemented.
It was also stated that even if such reforms were to be ignored, the Libyan banking community would continue to advocate for them until a change happens.

Excellence Chukwuma Chukwunaedu

Excellence Chukwuma Chukwunaedu

I enjoy marketing, technology and business. I help businesses and brands connect with their ideal customer profiles and build products that excite them and solve their problems.