Jessica Donati and Ali Shuaib Tripoli

Libya’s acute cash crisis was set to get worse and its banking system required a complete overhaul that would be guided by the International Monetary Fund (IMF) and World Bank, the central bank’s new governor said this week.

Saddek Omar Elkaber said just $1.5 billion (R12bn) out of about $170bn of Libyan assets abroad had been unfrozen, and with the first delivery of new banknotes still nearly two months away, the liquidity crisis was far from over.

“The first shipment will arrive at the end of December… We are going to have to manage the liquidity problem until then,” he said.

Elkaber, previously the deputy chief executive at the Arab Banking Corporation in London, replaced Gassem Azzoz as the head of the central bank a month ago, officials of the governing National Transitional Council said.

Reform of Libya’s banking system should be guided by a road map assembled by international bodies including the IMF, the new governor said, but for now the central bank’s priority was coping with the banknote shortage.

Wage increases, medication and reconstruction are putting a further strain on the very limited cash supply, and queues outside banks have grown longer this week ahead of the greater Eid festival of sacrifice, when families traditionally buy a sheep for slaughter at a cost of about 500 Libyan dinars (R3 200). A lack of cash as well as a shortage of animals has caused prices to rise by several hundred dinars, compounding the problem.

Despite a UN resolution scrapping sanctions after the death of ousted leader Muammar Gaddafi, the process of unfreezing Libyan assets is lengthy because the money is spread out across many countries with different rules.

Elkaber hoped the influence of international organisations would help shape a new Libyan banking model, and the groundwork had already been laid by IMF and World Bank over the past two to three years.

“The IMF and World Bank have a road map and I would like to go ahead with the facelift,” he said.

A primary obstacle would be overcoming a shortage of labour because the national workforce lacked the skills required for the banking sector.

For now, working out a basic budget and dealing with emergencies were the bank’s priorities. It was too early to comment on exchange rate policy, foreign licences or specific banking models, Elkaber said.

“Our focus is food, medicine and reconstruction.” – Reuters