In a significant development for Libya's economy, the Federal Reserve Bank of New York, backed by the US Treasury, announced on January 23, 2025, the suspension of all dealings with the Central Bank of Libya (CBL) and the Libyan Foreign Bank unless an independent auditing firm is appointed. This decision follows a meeting in December 2024 in Tunis, where governance and accountability concerns were raised regarding the CBL. Newly appointed CBL Governor Naji Issa communicated this directive to Khalid Shakshak, head of the Libyan Audit Bureau. [54de0344]
The Fed's actions stem from significant lapses in governance and allegations of mismanagement within the CBL, particularly regarding former governor Sadiq Al-Kabir's misleading claims about the bank's foreign currency reserves. This has led to growing doubts about the reliability of Libya's financial data. The recent resignation of National Oil Corporation head Farhat Bengdara further underscores the urgent need for change in Libya's financial governance. [54de0344]
These measures complicate financial operations and pose a serious threat to Libya's economic stability, risking further depreciation of the Libyan dinar and potentially leading to an economic collapse. The situation calls for urgent reforms to restore trust and stabilize governance in the country. [54de0344]
This crackdown by the US authorities comes at a time when the CBL and the Ministry of Economy and Trade had recently formed a joint working group to study market needs for goods and services, aiming to encourage local industries and achieve price stability. This initiative was announced on November 19, 2024, during a meeting between CBL Governor Naji Issa and Minister of Economy and Trade Mohammed Al-Hawaij. [41ab0530]
The CBL has been striving for transparency, having updated its monthly monetary, financial, and banking data on October 20, 2024. However, the recent US measures threaten to undermine these efforts and the overall economic recovery that Libya has been attempting to achieve. [d0d0a2e0]
In light of these developments, the Head of the Presidential Council, Mohammed Menfi, has also called for the cancellation of the tax on foreign currency purchases to combat inflation affecting citizens' salaries and savings. [d7b1288a]
As Libya navigates these turbulent waters, the collaboration between the CBL and the Ministry of Economy may be crucial in addressing the economic challenges posed by the US's recent actions and the internal governance issues that have plagued the country for years. [fb06f899]