Confusion and contradictory statements continue over rival currencies

There is continuing confusion and contradictory statements about the status of newly arrived banknotes printed in Russia for the Tobruk-based House of Representatives (HoR) government. At first the Presidential Council of the UN-brokered Government of National Accord rejected the bills and the US Embassy issued a statement saying the bills were counterfeit.

However, after a meeting between GNA authorities and those of the HoR, the GNA reversed its position claiming that the notes would actually help solve the cash shortage in Libya. However, the head of the Tripoli based Libyan Central Bank (LCB) still rejects them, apparently.

As TunisiaLive puts it: " At the time of writing, Libya’s GNA controlled Central Bank appears to have rejected the legitimacy of the Eastern Dinars, though the GNA itself has accepted the notes as an alternative to their own. It is not currently clear if Tunisia will recognise one or both currencies." The UN position and that of many countries is that there is only the one LCB based in Tripoli and supporting the GNA. However, declaring illegitimate, banknotes that the GNA recognizes is a strange way to show support.

The Tripoli-based CBL announced that it had received 112.5 million dinars worth of new banknotes yesterday. It posted a photo of a plane being unloaded. The banknotes are printed in the UK by De LaRue. However, none of the notes seem to have been distributed as yet. The CBL also claimed that another 250 million banknotes should arrive by the middle of the month.

However, critics say that a complete list of cargo planes arriving at Mitiga airport at Tripoli showed no cargo planes had arrived. The critics say that the money must have arrived earlier and being hoarded or else it did not arrive at all. A recent tweet notes: "#Tripoli sources: despite CBL announcement that currency was delivered, still no cash in the banks today. #Libya". The Tripoli CBL has made no more statements about the issue and denied that the Governor of the bank would hold a press conference on the issue. The new banknotes are to be distributed throughout Libya.

The critical shortage of cash has prompted new demonstrations in Tripoli. They are described in theLibya Observer and also the Libya Herald. The PM of the GNA Faiez Serraj has called for an urgent meeting between the two rival central banks and the HoR Finance Committee to help solve problems. The black market rate of Libyan dinars required to buy a US dollar is going up, reflecting the uncertainty being created.

​The situation is not being improved by the recent arrival of the GNA in Tripoli. Protesters against the cash crisis also complained about low living standards and poweroutages since the new GNA took power. The GNA and the UN are calling for unity with the GNA but the eastern part of the country is still being governed by the HoR and so far it has not voted confidence in the GNA as required by the Libyan Political Agreement(LPA). The LPA requires that the commander of the Libyan National Army (LNA) would relinquish his position to the Presidential Council(PC) of the GNA. General Khalifa Haftar and his supporters reject this and want him to remain in his position.

The eastern banknotes are already being put into circulation. A tweet reads:"New bank notes from#Libya Central Bank Al-Bayda arrive to the cities of Jalu, Awjila and Jakharrah, a total of 5mil" More are expected to be distributed this week end. The eastern notes should also be distributed in the west in areas controlled by the GNA but it is not yet clear whether this will happen.

Presidency Council of Libyan unity government decides to recognize eastern released currency

In an incredible reversal of policy, the Presidency Council of the UN-backed Government of National Accord (GNA) decided to honor the rival banknotes printed in Russia for the Bayda-based Central Bank of Libya.

The bank notes have different security features, watermarks, and serial numbers from the Tripoli-based Central Bank recognized by and cooperating with the GNA. Both the U.S. and the Presidential Council had come out with statements that characterized the eastern notes as counterfeit. A statement by the U.S. embassy said:

The United States concurs with the Presidency Council’s view that such banknotes would be counterfeit and could undermine confidence in Libya’s currency and the CBL’s ability to manage monetary policy to enable economic recovery.

There is only one Libyan central bank recognized by the UN, the GNA and most of the international community — the one based in Tripoli. If the PC recognizes the bank notes, in effect the GNA is in practice recognizing the Bayda central bank as well. It will be interesting what the U.S. and the UN have to say about this or if they just ignore it, as often happens when the facts are inconvenient.

Before the rejection of the eastern banknotes, GNA Prime Minister Faiez Serraj had given a TV interview in which he suggested the extra eastern money would help solve Libya's serious cash shortage. As a tweet puts it: "This Sarraj interview on #Libya TV blessing eastern CBL's money printing was *before* the US envoy and embassy declared it illegal yesterday." When the US declared the eastern money counterfeit there was a strong reaction on social media as this tweet notes:" #Libyan social media,particularly in the east,awash with Anti-America vitriol over US interference during cash crisis." Perhaps the change of policy is intended to signal a rejection of foreign influence.

The PC explains that it changed its position after a meeting with members of the finance committee of the HoR. It was apparently agreed that the two rival central banks would jointly supervise the issuing of the new notes and that they would be distributed fairly throughout the country. The PC's original objection supposedly was that the arrival of 4 billion more Libyan dinars would destabilize the currency and cause inflation. The PC claimed that there were already 24 billion Libyan dinars in circulation. However, there are not enough dinars in the banks and banks are limiting withdrawals. Libyans distrust the banking system. Many buy hard currencies. There are often long queues at banks of people waiting to withdraw money. The east has complained that the Tripoli-based CB does not distribute a fair share of new currency to the east and claims its new notes are needed to deal with its own constant cash shortage.

Serraj made it one of his priorities to end the currency shortage and liquidity crisis. He now claims the east's banknotes may ease the problem. The HoR has assured the GNA that its own bills will be made available throughout the country. Many fear that having its own currency would cause the east to take a more independent line. It is taking an independent line! The Libya Herald notes:The United States is unlikely to be pleased by the PC’s change of mind. Yesterday it said it was gravely concerned and shared the PC’s earlier view that the new notes would be forgeries that would destabilise the Libyan Dinar. It insisted that the international community only recognised the Central Bank in Tripoli.The eastern notes are not likely to be accepted internationally except perhaps by a few countries. The two competing notes are likely to have wildly different values when exchanged for other currencies such as the US dollar or the Euro.

Rival Libyan central banks print competing currencies

The battle between the UN-backed Libyan Government of National Accord (GNA) with PM Faiez Serraj and the rival Tobruk-based House of Representatives (HoR) under PM Abdullah Al-Thinni has resulted in several parallel institutions.

There are two National Oil Companies and two Central Banks. One Central Bank is headquartered in Bayda and the other in Tripoli. The UN and most of the international community recognize only the Tripoli-based bank. There have been meetings between officials of the two national oil companies that has resulted in an agreement to begin oil exports after they had ceased. Although officials of the two banks met in Tunis in an attempt to forge some sort of unification, they appear to be still going their own way with each issuing its own banknotes. Senior diplomats worry that two rival banknotes circulating may undermine the position of the new UN-brokered GNA in Tripoli and cause economic chaos.

The UK company De La Rue has long supplied notes for the Libyan government. It sent 70 million dinars worth about $50 million to the GNA central bank in Tripoli and is delivering another 1 billion dinars now and during Ramadan. The rival bank in Bayda, with governor Ali Salim al-Hibri, has reportedly printed 4 billion dinars worth of banknotes in Russia. According to diplomats, the two currencies will have different serial numbers, security details, and watermarks. They are each signed by their own bank governor as well. Many worry that the two competing, non-interchangeable currencies will boost inflation, which is already high at 14 percent per annum. Diplomats also worry the situation will cause further erosion in support for the UN-backed GNA.

The Bayda eastern central bank holds almost $185 million in gold and silver coins but cannot access it since the Tripoli-based central bank, which has the combination, will not give it to the Bayda bank. The banknote conflict could exacerbate the long lines formed to withdraw cash and make Libyans even more reluctance of Libyans to deposit cash in banks, making the liquidity crisis worse. From 2013 to 2015 bank deposits fell in Libya from 6 billion dinars to 3 billion dinars.

The new eastern notes of 20 and 50 dinars are to be put into circulation on June 1. The Bayda bank announced that the notes are signed by Governor Ali Al-Hibri of the eastern bank rather than Governor Al-Siddiq Al-Kabir of the Tripoli-based bank. A source in the bank said: "The printed notes are amounted to LYD 4 billion and are the same sizes and denominations as the current banknotes." The new notes will circulate with those used at present. The Tripoli-based central bank has made no comment on the Bayda notes as yet. However the United States has already commented on the eastern notes.

The US embassy issued commentary on its Facebook page. The statement notes that the US and 20 other countries at a recent Vienna meeting affirmed that the Central Bank of Libya (CBL) must function under the sole stewardship of the GNA. The Tripoli-based CBL is the only national banking institution under GNA stewardship. The statement went on:The United States has been formally advised by the Libyan Presidency Council (PC) in a letter dated May 23 that Mr. Ali El Hebri, claiming to act as the Governor of the Central Bank of Libya, concluded an agreement with an international firm to print and deliver a large quantity of Libyan dinar banknotes. The United States concurs with the Presidency Council’s view that such banknotes would be counterfeit and could undermine confidence in Libya’s currency and the CBL’s ability to manage monetary policy to enable economic recovery.The US statement also warned about attempts to break into secure CBL facilities, meaning the safe with the gold and silver in Bayda. The US the statement claims will work with the GNA to ensure that Libya's wealth is not diverted for any fraudulent of corrupt purposes.

Given that the notes have different security features, water marks and serial numbers, and are also not signed by the recognized bank governor, it is strange to call these bills "counterfeit." Counterfeit bills are intended to look as much as possible as the real bills so they can be used exactly as the real ones. These bills make no attempt to do that. They are replacements for the Tripoli-based bills. The issuing of rival currencies appears to be part of widening divisions between the GNA and HoR making it less likely that the GNA can achieve its goal of unity.