Tripoli Pours Old Notes Back in Circulation

Libya’s central bank has ordered banks to recirculate old currency in the first sign that the oil-rich north African state is facing liquidity problems amid international efforts to freeze the regime’s assets.

Libyan leader Muammar Gaddafi
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Libyan leader Muammar Gaddafi

Officials at the central bank’s office in Benghazi told the Financial Times that the directive came as they were informed by fax on Tuesday that Farhat Omar Bengdara, the governor, had been replaced by Abdulhafiz Zlitni, a former central bank governor and secretary of planning and finance.

The officials said dinars that they described as fourth and fifth issue had been taken out of circulation at the end of last March, but they said stocks of the old notes remained in the central bank, as well as at commercial banks, and would now be considered legal tender again.

“People are withdrawing money, we had to use it,” a central bank official said. “We have a large amount stored.”

The officials in Benghazi, who still report to the central bank’s head office in Tripoli, seemed to be as much in the dark about Mr Bengdara’s situation as anyone.

They said the fax telling them that he had been replaced came with no explanation, and they had “just heard the rumours”.

“The new governor we will just deal with the same protocol,” the official said. “The central bank is one of the few institutions that works as a proper institution ...we did not hear about him for days and we still worked properly.”

The month-long crisis in Libya has meant the central bank’s office in Benghazi has been effectively cut off from its headquarters and is unable to replenish its capital. It is now trying to support commercial banks throughout the opposition-controlled east and ensuring banks have sufficient funds to pay salaries.

The bank official said that “liquidity is available so far”, but that it was hard to estimate how long they could survive if the conflict continued.

“Maybe two or three months,” the official said.

An opposition official said there were concerns that the regime was trying to get round the assets freeze by using businessmen close to the regime to liquidate assets offshore.

It was seeking to draw up a list of people whom it suspected of raising funds for the regime.

“We have some insiders telling us that and in Libya it’s a very close society ...we know guys of the Gaddafi regime set up offshore companies,” said Mohamed el-Huni, a member of the opposition’s banking committee in Benghazi.

“This is what we are afraid of. They could liquidate gold, some real estate, because we know they are suffering a cash crisis, especially foreign currency.”

He said the opposition was trying to investigate and draw up a list of people it suspected of raising funds for the regime, which might then be distributed to the rebels’ foreign affairs representatives and ambassadors who had pledged their support to the revolution.

In particular, Mr Huni said there were concerns about executives related to a “housing and facilities board”, which was responsible for infrastructure projects in Libya, but also had companies offshore.

“What we are trying to do is stop the transfer of what they are trying to do,” he said.

Mr Huni, a stockbroker, said there were also concerns that Mr Bengdara, who is considered by opposition officials to be close to Colonel Gaddafi, could be using his time overseas to find ways to access funds for the regime.

Mr Bengdara told the Financial Times in an e-mailed statement that he had been in Istanbul, but insisted that he was doing his job, and that it was easier to conduct business abroad than in Tripoli.

His replacement is also deemed to be a stalwart supporter of Col Gaddafi, and Mr Huni described him as “one of the corners of the regime”.

Mr Huni said they believed Col Gaddafi’s sons had kept most of their assets offshore, including in Turkey, Dubai, Bahrain, Europe, South Africa and Malta.

“We are afraid of Malta, it has good relations with the Gaddafi regime, we call it another province of Libya, rather than an independent state,” he said.

He alleged that Malta was used as an offshore centre when Libya was under sanctions in the 1980s and 1990s.