libya herald
By Sami Zaptia.
Tripoli, 25 May 2013:
An IMF Working Paper entitled “Searching for the Finance-Growth Nexus
in Libya” written by Serhan Cevik and Mohammad Rahmati concludes that
there is “a negative correlation between the hydrocarbon windfall and
commercial bank lending to the private sector”.
The paper investigated the causal relationship between financial
development and economic growth in Libya during the period 1970–2010.
The empirical results, the paper says, indicate the lack of long-run
relationship between financial intermediation and nonhydrocarbon output
growth.
“A well-functioning financial system is critical for enhancing the pace—and quality—of economic growth”
The study reports that “despite a significant expansion, financial
intermediation in Libya remains rudimentary and shallow. The empirical
results indicate that there is no long-run relationship between
financial intermediation and nonhydrocarbon growth during the period
1970–2010.
According to the empirical findings presented in this paper,
“nonhydrocarbon economic activity depends largely on government
spending, which is in turn determined by the country’s hydrocarbon
earnings”.
Looking forward, the study reports that “financial development is
essential to mobilizing domestic savings in order to fund private
sector–led economic diversification, as well as to providing a greater
range of high-quality financial services. In turn, the development of a
growth-enhancing, vibrant financial system requires a far-reaching
spectrum of structural reforms and policy measures”
Libya’s financial system
Libya’s financial system is composed of a network of 15 commercial
banks, four specialized credit institutions, five insurance companies,
and a recently established stock market. Although the banking system
managed to sustain its stability with a significant balance sheet
expansion over the past decades, the report concludes that “financial
intermediation remains shallow and concentrated”.
Commercial bank lending to the private sector, the report
continues, increased from 2.2 percent of GDP in 1970 to 31.5 percent in
1990, but then declined to 21.8 percent in 2000 and 9.5 percent by
end-2010. The report goes on to note that “this is particularly
surprising given the massive amount of excess liquidity in the banking
sector”.
“The financial system in Libya has undergone substantial
changes over the past decade, but remains rudimentary, shallow, and
bank-dependent”
This is explained in the huge bank liquidity. “While credit to the
private sector increased in nominal terms from 2.7 billion dinars in
1990 to 8.8 billion dinars by end-2010, commercial bank deposits with
the Central Bank of Libya (CBL) expanded from 1.4 billion dinars (or 20
percent of total assets) to 43.9 billion dinars (or 67.2 percent of
total assets).”
“In other words, the share of credit to the private sector in total
banking assets declined from over 40 percent to about 13.5 percent, as
banks accumulated “excess” liquidity in the balance sheet.”
“This behavior reflects, in our view, an amalgamation of factors
including the volatility of hydrocarbon earnings, lack of adequate
lending opportunities in nonhydrocarbon sectors of the economy, and
institutional bottlenecks such as nonexistence of a credit information
system”.
“Profitability remained practically unchanged over the past decade”
Analysing the status of Libya’s banks, the report says that asset
quality steadily improved, as demonstrated by a decline in the
nonperforming loan (NPL) ratio, and better loan-loss provisioning. The
NPL ratio fell from the peak of 35.5 percent in 2004 to 20.2 percent as
of end-2010, while the capital adequacy ratio increased from 10.4
percent to 17.3 percent.
“The banking system appears to be sound, but its growth is driven mainly by off-balance sheet items.”
On the other hand, profitability indicators, such as the return on
assets and the return on equity, remained practically unchanged over the
past decade—at an average of about 1 percent and 11.5 percent,
respectively.
“Particularly after the removal of international sanctions in 1999,
Libya’s banking sector experienced a momentous increase in off-balance
sheet items such as letters of credit and guarantees. As of end-2010,
off-balance sheet items amounted to 84 percent of on-balance sheet
assets, compared to 12 percent in 2004, which is partly an indication of
banks’ aim to generate fee income when lending is constrained and net
interest margin is low.”
Banking Reform
The extent and diversity of financial services provided are limited
and hindered by institutional weaknesses including the lack of a robust
system of property rights, the absence of credit assessment information,
the lack of competition, and government ownership. Since the removal of
international sanctions, Libya moved forward with a broad spectrum of
reform initiatives aimed at achieving greater openness and gradual
liberalization of the financial system.
“Libya moved forward with reform initiatives prior to the
revolution, but the banking system remains predominantly in the hands of
the public sector.”
Nevertheless, in spite of the privatization of two state-owned banks,
the banking sector still remains predominantly in the hands of the
public sector and operates under extensive controls of the government.2
Furthermore, specialized credit institutions continue to function as an
extension of the government in providing support to certain sectors such
as agriculture, real estate, and manufacturing, through heavily
subsidized credit facilities.
Oil revenue hampers financial sector
“There appears to be a high degree of correlation
between hydrocarbon GDP and nonhydrocarbon GDP, which can be interpreted
as a reflection of the spillover effects, mainly through the fiscal
channel. At first glance, this may seem contrary to the “resource curse”
literature that documents a negative relationship between resource
rents and output growth.
However, these studies tend to focus on the long-run effects of
resource abundance by using cross-sectional data. In the case of Libya,
although there is a robust relationship between the hydrocarbon windfall
and nonhydrocarbon GDP growth
, there is also a negative correlation between the hydrocarbon windfall and commercial bank lending to the private sector.
“A windfall in hydrocarbon revenue tends to increase nonhydrocarbon GDP, while hampering financial deepening”
Although data constraints prevent a conclusive analysis, we reason
that the crowding-out effect may be a dominant factor in Libya. In other
words,
a large expansion in government spending as a share of GDP shrinks the private sector’s role in overall economic activity.
According to the study’s empirical findings, “nonhydrocarbon economic
activity depends largely on government spending, which is in turn
determined by the country’s hydrocarbon earnings. In our view, the lack
of long-run relationship between financial intermediation and
nonhydrocarbon growth in Libya reflects an amalgamation of factors
including the volatility of hydrocarbon earnings, lack of adequate
lending opportunities in nonhydrocarbon sectors of the economy, and
institutional bottlenecks such as nonexistence of a credit information
system”.
In rounding-up, the IMF Working Paper concludes that “
the development of a growth-enhancing financial system requires a far-reaching spectrum of structural reforms. “Financial
development”, the report continues “is essential to mobilizing domestic
savings to fund private sector–led economic diversification, as well as
to providing a greater range of high-quality financial services. That
in turn requires a comprehensive strategy based on a well-sequenced set
of structural reforms and policy measures that will bring Libya’s
financial system more in line with international practices”. The report
list the reforms as follows:
- safeguarding macroeconomic stability, especially through a
countercyclical fiscal policy stance that minimizes the impact of
volatile oil prices;
- improving the legal framework to protect creditor and minority shareholder rights;
- streamlining the insolvency regime;
- enhancing competition in the banking sector to improve the quality of intermediation and to strengthen bank governance;
- reducing the role of state banks, including SCIs, which tend to lead to distortions and impede financial intermediation;
- augmenting the system of credit information gathering and sharing,
which would enable banks to better assess credit risk and thereby
improve access to finance, especially for small and medium-sized
enterprises and low-income households; and
- introducing market-oriented monetary policy instruments, which would
help in managing large amounts of structural excess liquidity
قال
خبراء ان الجنوب الليبي الذي قدم منه مسلحون اسلاميون هاجموا ارليت
واغاديز في النيجر، تحول في الاشهر الاخيرة الى احد معاقل تدريب خلايا
القاعدة في المغرب الاسلامي بعد الهجوم الفرنسي في مالي. وفي هذه المناطق
الصحراوية المترامية الاطراف الخارجة عن كل سيطرة، اصبح المسلحون المتطرفون
يملكون قواعد جديدة يهددون منها بلدان المنطقة وخصوصا الدول التي ايدت
فرنسا في هجومها في مالي.
ليبيا المستقبل:
نقلت صحيفة "الشرق الأوسط" من مصادر ليبية وصفتها برفيعة المستوى، أن
"ليبيا ستشهد تغييرات دراماتيكية حادة بالجملة، في هرم السلطة الحالية في
البلاد خلال الأيام القليلة المقبلة، من أهمها إعلان إستقالة رئيس المؤتمر
الوطني، محمد المقريف، ونائبه جمعة عتيقة". وأضافت الصحيفة أنه "سيتم تغيير
أربعة وزراء في حكومة علي زيدان". 
أعلن
وزير الدفاع الليبي محمد البرغثي أن سلطات بلاده قادرة على اعتقال
المتهمين باستهداف القنصلية الأمريكية ببنغازي في 11 سبتمبر الماضي، بينما
طالب وزير العدل الكتائب المسلحة بالالتزام بالقانون. 
تلقت
سلطات منفذ السلوم البري، يوم أمس الجمعة، تعليمات جديدة من السلطات
الليبية بمنع دخول المصريين إلى ليبيا، في حين سمحت لرعاياها الليبيين
بالعبور إلى مصر. يأتي ذلك في الوقت الذي يشهد فيه المنفذ استمرار حالة
التكدس بسيارات النقل الثقيل المحملة بالبضائع، بسبب قرارات السلطات
الليبية. كثفت مديرية أمن مطروح الخدمات المرورية على طول الطريق الدولي
إسكندرية / مطروح، ومطروح / السلوم، والتنبيه على السيارات المتجهة نحو
ليبيا بقرار غلق السلطات الليبية لحدودها مع مصر.
"