Libya's economy and public finances struggle to end a decade of violence

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TRIPOLI BENGHAZI, Libya, September 9 Reuters - Libya must reunify its fragmented economy and public finances if it stands any hope of ending a decade of violence ; moves towards that goal are making slow progress.

Businesses and ordinary people struggle to carry out basic financial transactions, underscoring the continued dysfunction while also showing that peace moves have failed to stop rival factions competing to control economic levers.

The harm has reached everyone. Today, money cannot be transferred from two accounts in two different banks within 100 metres of Tripoli on one street. Husni Bey was a prominent businessman, and said there is no justification to be like that.

Central Bank of Libya CBL governor Sadiq al-Kabir joined the U.N. backed online talks with the head of its rival eastern branch to discuss reunifying the bodies, though any such moves remain at an early stage only

The stumbles, seen in disputes over the budget and the lack of clearing operations between eastern and western banks, reflect potential change to political manoeuvring at a moment of potential change.

Libya has been in chaos since the 2011 NATO-backed uprising which ousted Muammar Gaddafi, with control over different parts of the state challenged by both political and local means amongst an array of regional forces.

In March, an interim unity government was declared by the largest eastern and western factions that have been fighting since 2014 with the goal of holding National elections in December - moves seen as the best hope for peace in years.

However, that progress is currently widely seen as having stalled as powerful figures try to prevent any loss of leverage, or to reposition themselves to benefit from a new dispensation.

During the past seven years, a rival administration in the east emerged with its own central bank, a charter oil company and other state institutions, claiming legitimacy from the Tobruk-based parliament who was elected in 2014.

That raised critical questions over accountability for spending by each side and how debt absorbed into national accounts by the eastern bank and used to fund a war against Tripoli and pay salaries of eastern forces.

Interim Prime Minister Abdulhamid Dbeibeh was a mandate to prepare for elections, unify the state institutions and improve services - but has not made any progress.

Parliament has repeatedly rejected his budget proposals and diverse parts of the current political bodies have created over the leadership of various institutions, including the oil company and central bank.

Meanwhile, Dbeibeh has continued to spend on salary and as an emergency measures, using existing methods.

Reunification of the CBL would be the key goal of any effort to end the economic divisions. The Tripoli-based CBL branch is regarded internationally and it cut eastern banks off from most clearing operations in 2014.

Companies in the east or west now avoid using banks based on the other side so that their financial transactions can be done easily say Alaref Algajiji, chief executive of a Libyan business council.

Last December, as the peace process accelerated, the CBL held for the first time in years a full meeting of its governors to agree on a new unified exchange rate that involved devaluing the currency.

That move helped ease a liquidity crisis and was seen as a precursor to reunifying the Eastern Commercial Banks and rebuilding clearing operations between Tripoli and Central Banks.

A financial review conducted by Deloitte as part of the U.N. supported peace push was completed in July using the data supplied by the rival central bank branches, but without conducting an independent audit of either.

It drew up a roadmap towards reunifying them, which the governor of each has said it is following.

Kabir informed the Tripoli-based CBL Governor in Reuters in practical answers to questions that it was beginning to take written measures towards the reunification.

He said the CBL was working with the presidency council, the unity government, U.N.'s Libya mission and the attorney general's office to agree on a roadmap.

Kabir of the Global Initiative Against Transnational Organised Crime says it was better for Jalel Harchaoui to move slowly and that he may also worry about how eastern forces would use renewed access to national banking.

CBL Governor Deloitte said the lack of clearing for eastern banks was an economic crime but added that he, too, was preparing for reunification through the process outlined by Ali al-Hibri.

Nevertheless, he challenged the figures Kabir had given for public debt levels and accused him of using political arguments to sidestep the reunification process. He also said the unity government's budget proposals were too high and went against agreements reached last year to unify the exchange rate.

This is a major crime in the history of Libya, he said.