Banking crisis throws Libyan status quo into jeopardy
Libya's economic crisis deepens as rival governments' spending outstrips revenue, risking collapse. The Central Bank warns of unsustainable finances, while both factions blame each other. Urgent reforms are needed, but self-preservation may lead to further conflict and instability.
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4 min read
With spending by Libya’s rival governments now outpacing state revenue, the economic system that has maintained the country's political stalemate is now coming to an end. The Central Bank of Libya (CBL) has tackled increasing spending by the Government of National Unity (GNU) in Tripoli and the rival Government of National Security (GNS) in Benghazi, mainly by devaluing the dinar and printing more money.
These efforts have only sought to slow down the impending collapse and have failed to address the real underlying cause of uncontrolled public spending. Now that the financial system that backed Libya’s four-year status quo is critically untenable, Libya’s rival governments need to implement real financial reform, combat corruption, and work to mend the nation’s institutional divide. However, there is a high chance that the GNU and GNS will seek to take sole control of the CBL’s dwindling resources, threatening further political destabilization and renewed violence.
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