Libyan central bank chief challenges PM on national budget

TRIPOLI - Libya's central bank governor has called for a unified national budget in an apparent challenge to his former ally Prime Minister Abdulhamid al-Dbeibah amid a slide in the value of the country's dinar.

Central Bank of Libya (CBL) Governor Sadiq al-Kabir published a letter to Dbeibah on Tuesday urging an end to what he described as parallel spending "from unknown sources" in order to preserve the state's financial sustainability.

Disputes over access to Libya's state finances have often been at the heart of factional rivalry that has ripped the North African country apart since a NATO-backed uprising in 2011.

Kabir's demand for a unified budget is a reference to the country's political divisions. Dbeibah's Government of National Unity (GNU) operates in Tripoli and the west, while a parallel administration is backed by the parliament in the east.

The letter is "a direct, brazen challenge to the authority and legitimacy of Dbaibah's administration," said Libya expert Jalal Harchaoui of the Royal United Services Institute.

"A unified budget can only be achieved through profound political changes, including at the highest echelons of the incumbent Tripoli government," he said.

Libya's last unified budget, agreed by the Tripoli government and approved by the parliament, came in early 2021 during an attempt to bring together the country's rival factions after years of division.

Dbeibah's GNU was installed through a UN-backed process in 2021 but the parliament stopped recognising its legitimacy at the end of that year after a failed attempt to hold national elections, which led to prolonged political deadlock.

Dbeibah draws his authority to spend money from central bank reserves from a banking law, but this is rejected by the parliament. In practice, he relies on the CBL releasing money.

While Dbeibah and Kabir were once seen as close allies, they have fallen out with the GNU ramping up public spending to a level that worries the central bank. Libya's dinar has been steadily eroding on currency markets since last year.

Crude oil-for-fuel swaps to supply a subsidised domestic fuel programme are eating into revenues, Harchaoui said, contributing to what he called excessive spending by the GNU and the parallel administration in the east.

Both administrations accuse each other of corruption and deny the other's accusations.

"From where will the government provide funding for (promised salary) increases?" Kabir asked in the letter, referring to National Oil Company (NOC) revenue forecasts.