Last week, Correspondents published an interview with Dr. Suliman Al-Shahomy, financial expert and founder and former chairman of the stock market, in which he presented his views regarding the economic and financial crisis in Libya.

For more on this issue, Correspondents conducted an interview with Ramzi Al-Agha, the head of the liquidity crisis management committee at Al-Bayda’s Central Bank of Libya, in which he responded to some of Al-Shuhoumi’s proposals.

Last week, Correspondents published an interview with Dr. Suliman Al-Shahomy, financial expert and founder and former chairman of the stock market, in which he presented his views regarding the economic and financial crisis in Libya.

For more on this issue, Correspondents conducted an interview with Ramzi Al-Agha, the head of the liquidity crisis management committee at Al-Bayda’s Central Bank of Libya, in which he responded to some of Al-Shuhoumi’s proposals.

Why did you print currency to cover the deficit, despite knowing this would cause problems?

The main reason was that Al-Sadiq Al-Kabir, former governor of the Central Bank of Libya (CBL) and member of its current board of directors issued a decision since the beginning of the crisis to print around 6.3 billion dinars, of which 800 million dinars were allocated to the eastern region (sent in individual shipments the last of which was 20 million dinars). This is a very small amount given the current accounts in the eastern region banks (salaries alone need 400 million dinars). Thus, the distribution was not fair and the additional amount had to be printed to solve the liquidity problem.

Mr. Shuhoumi said the two central banks have become parties to the conflict and that Al-Bayda CBL does not actually possess anything and two thirds of the Libyan banks do not do transactions with it. Is this true?

We have not been party to the conflict. At the beginning of the parliament session in Tobruk, Mr. Al-Kabir locked the special system of Benghazi’s CBL. This was a catastrophe that caused the rift. Regrettably, he did not do that at the start of February revolution. As a result, there was a schism between the commercial banks of Benghazi and Tripoli including the clearing process through which all the state transactions are performed (salaries, payments, budgets).

Mr. Shahoumy’s statement that Al-Wahdeh Bank is split, where under one general manager, part of the bank is following the Bayda CBL instructions while the other part is following the Tripoli CBL instructions, is not true at all. There is no split.

You can verify this with Al-Wahdeh Bank general manager. It is true the major branches of Al-Wahdeh Bank and the Commercial Bank in the eastern region were deprived of their allocations, but this has not caused a rift. We have applied all those Tripoli CBL instructions that support the banking system and did not obstruct them. Our statements were all in support of public good and I challenge any person to present any such statement by us cancelling any orders coming from Tripoli CBL or to prove that we asked the banking institutions to follow our instructions only. Yet Tripoli CBL has prevented the commercial banks to receive our express mail and they did reject to receive it several times.

Do you think the Presidential Council of Libya is able to resolve the crisis and reunite the two central banks after the parliament’s failure to do so?

Mr. Shahomy is a bit pessimistic in his predictions. The parliament has not failed to solve the crisis; its financial committee is an active player of the dispute settlement; the last meeting in Tunis at the beginning of this month under the patronage of the Presidential Council and the parliament financial committee managed to reunite the two central banks through creating the appropriations coverage committee and the currency issuance committee.

The Tunis meeting agreed on withdrawing the sixth issuance of the 10-dinar note. To avoid inflation, the sum intended to be printed will be used as reserve and will not be used for trading.

Are you for or against the proposal by a bank CEO to sell the gold reserves? Is it a solution?

Libya has 114 tons of gold as reserves and selling them will solve a major part of the problem, not to mention the foreign exchange it will provide.

We may have to sell the gold reserves— that is why we create reserves. This approach is applied even at the individual level. So many households tend to sell some gold when they need cash. Our focus is the citizens, the owners of this wealth. If we do not take this measure now, then when?

Another proposed solution to the liquidity problem was the electronic cards. Do you find this feasible?

A major part of the liquidity problem is now being solved through the electronic cards. Eighty-percent of the banks have the required infrastructure. Al-Wahdeh Bank has already started using these cards and Al-Aman Bank is using them for a long time now. We are ready to this stage and have the necessary infrastructure and systems. We may need some technical requirements and these will be provided within two months and then we will start immediately.

Al-Shuhoumi thinks the huge expenses as well as the banking sector decision makers are responsible for the crisis. Do you agree?

Mr. Shahomy did not admit that the poor administrative policy of Tripoli CBL led to U.S. dollar appreciation in the parallel market because it made the commercial banks stop providing traders with credit and import funding, which pushed them towards the parallel market. Thus, cash flows went to this market and not to the banks.

 In the 1980s, the Libyan financial system faced a severe crisis when oil prices dropped as low as $18/bbl. The central bank stopped all credits and abolished the currency and within three days, all the cash money was there at the central bank.

Tripoli CBL had to resolve the credit issue and intensify control over the imports using such credits. Unfortunately, they did not do so.

Recently, Tripoli CBL submitted a long memo specifying measures to resolve the credit issue but the implementation of these measures looks almost impossible. Thus, the unified credit committee, created by the two central banks during the Tunis meeting, will reduce the required items and concentrate on the most important aspects of the credit issue.