GNA put Libyan people’s money in grip of Turkish banks

Shaimaa Yahya

Turkey invested well in its relationship with the Libyan Government of National Accord (GNA), but it was not satisfied with the security and maritime agreement previously concluded between them, as Libya’s money became a savior for the severe economic conditions in Turkey, helping to stabilize the banks in Ankara in an attempt to revive the lira again.

After Libya suffered from the deteriorating situation following the overthrow of late President Muammar Gaddafi in 2011, Turkish companies working in Libya stopped operations, so Turkey has demanded financial compensation for the work that was carried out in Libya decades ago. Due to the deteriorating financial situation of Libyan banks and the lack of liquidity, Turkey has seized the Libyan balances in its banks until the debts are settled, according to a finance official in Libya’s interim government.

Ramzi al-Agha, head of the Liquidity Crisis Committee at the Central Bank of Libya in Al-Bayda, confirmed that the Libyan balances deposited in Turkish banks will not be available until the Libyan debts due to Turkey are paid, including the cost of military assistance provided to the GNA forces, the treatment of wounded Libyans in Turkish hospitals, and the expenses for transporting Syrian mercenaries, as well as implementing judicial rulings to compensate Turkish companies for works and projects carried out in Libya and some that were not completed and could not be paid due to the ongoing conflict. This is due to the deteriorating economic situation in Turkey in the wake of the corona virus pandemic.

Despite the lack of liquidity, the amount of Libyan funds frozen in Turkish banks since the fall of the Gaddafi regime has reached approximately $4 billion, while the Libyan bank owned more than 60% of the Arab Turkish Bank. But according to Agha, the Libyan Central Bank has transferred a large portion of the foreign exchange account, which exceeds $80 billion, and pumped it to Turkish banks recently, after the GNA transferred $4 billion to the treasury of the Turkish Central Bank last February. These funds became unavailable for use by the Libyan state according to instructions from the bank’s governor, Seddik al-Kabir.

Saving Turkey’s economy

Turkey has taken advantage of its relationship with the GNA to use the Libyan funds in its banks to compensate for Turkey’s economic losses due to the spread of the corona virus and its impact on tourism activity, which Ankara relies on for a large portion of its revenue. This led to the collapse of the Turkish lira and a cessation of economic activity, without regard to the impact on the economic and humanitarian situation in Libya.

The Brotherhood has supported Turkish President Recep Tayyip Erdogan and his regime, as they in turn control the central bank and deposited about $6 billion in Turkish banks belonging to the regime, which Turkey is seeking in order to improve the economic situation.

It is expected that these measures will inevitably affect the Libyan economy, which will exacerbate the humanitarian situation as long as the central bank is unable to use its reserves, in addition to lower oil prices.

On January 18, the Libyan National Oil Corporation in Tripoli announced that oil production decreased from 1.2 million barrels per day to only 32,000 barrels per day, indicating that oil production fell by 75% after the closure of the main oil ports in eastern Libya, forcing the GNA to reduce its budget for 2020 from 55 billion dinars (€35 billion) to approximately 38 billion dinars (€24.8 billion).