During our annual NCUSLR conference held on November 13th, 2018 in Washington DC, many participants raised questions to the speakers that we could not respond to due to time limits.
As such, we have initiated a series of follow up interviews with our conference speakers to answer these lingering questions.
As you go through these questions and answers please keep in mind that neither the questions nor answers reflect the opinions of NCUSLR.
Presenter featured in the following Interview:
Dr. Mohsen Derregia, Former CEO & Chairman, Libyan Investment Authority
Dr. Mohsen Derregia, who holds a PhD in Finance and MBA, became an academic in the UK for 12 years after having had a career as a successful entrepreneur in Libya. In 2012, he was called to lead the Libyan Investment Authority in a very sensitive post-revolution period and was very close to the challenges Libya faced both before, during, and after the revolution.
Presented at the 2nd Annual NCUSLR Conference on Panel III, The Libyan Economy: How to repair the damage. Topic: "State of the Financial Crisis: Banks and economic policy in Libya"
View Mohsen Derregia’s presentation here
Post-Conference Interview with Mohsen Derregia
Yes, but with several caveats. The success of the policy requires fiscal discipline on the part of GNA, and requires smooth operations by CBL and the banking sector. The main goal of the policy is to reduce the money supply and repay public debt to facilitate a reduction of the price of foreign currency. The secondary, but also very important goal, is to end the huge difference in price paid for liquidity that resulted from hoarding of cash outside the banking sector and the lack of alternative effective payment methods. To illustrate this, Libyans resorted to exchanging cheques for cash and pay a premium of 45%. This in turn created much corruption in the sector. Another goal is to limit the role of the black market for foreign currency. The policy has had some positive impact. The price of foreign currency is down by about 30%, liquidity premium is down by more than 90% - now a 3% premium is paid to swap cheques for cash, and the money raised through imposing foreign currency sales tax can contribute towards a reduction in public debt. However, there are signs that this money is also attracting spenders within the government.
Frozen assets require a great deal of transparency and planning to facilitate their management under the current UN sanctions, kept in place ostensibly by Libyan desire expressed in 2012. The LIA and Libyan government never managed to be stable enough to make a convincing approach to unfreeze or manage the assets. The best way in my view is to manage the assets within countries so that various host countries' governments can support a decision to allow moving of assets from class to class, or even liquidate or purchase new investments. LIA needs to provide a detailed plan of action to deal with underperforming assets by explaining the problem, define a course of action into steps to be taken over a clear time horizon to deal with it, and present the plan to the governments of the host nations and the UN Sanctions Panel.
The answer very much depends on the actions taken. Frankly, the way things are going now I cannot see things improving much. The state is not present in many parts of the country and is mostly asserting itself in terms of international recognition rather than public approval and support. The government has more or less withdrawn from public life, which I know is shocking to hear, but this is reality. Further, the government has no economic policy and deals with issues when they become critical, with very little proactive decision making. Much needs to change before one can say the economy in Libya will be better in the next 2-4 years, although it is relatively easy to improve the economy. It will take vision and some sound management.
The views shared in this published interview reflect those of the guest contributor and not necessarily the views of the National Council on U.S.-Libya Relations.