Farhat Bengdara, the governor of the Central Bank of Libya, has been lobbying foreign governments to soften sanctions on the central bank while based in Istanbul, the Wall Street Journal reported on Wednesday.
Bengdara told the newspaper in an interview conducted at Istanbul's Ataturk Airport that he "obviously" could not return to Tripoli, and confirmed that Abdulhafid Zlitni, Tripoli's minister of planning and finance and a former governor of the central bank, has been temporarily named his replacement, until such time as Bengdara returns. It is thought that Bengdara relocated to Istanbul in late February, following the outbreak of civil unrest in Libya, which has been countered by an armed response from military units and forces remaining loyal to Muammar Gaddafi, the Libyan leader.
Bengdara told the paper that he had been in touch with officials at the US Treasury and the European Union, in a bid to dampen the effect of sanctions on Libyan citizens. "They understand that we have to find a mechanism whereby freezing central bank deposits does not stop imports of food and medicine," he said. Bengdara added that although the snap appointment of Zlitni went against the central bank law, Tripoli had already contacted other financial institutions and central banks, telling them Bengdara no longer represents the central bank.
Staff at the governor's office said they were unable to respond to all queries. Saleh Keshlaf, the governor's secretary and spokesman, could not be reached despite repeated attempts.
Berlin on Thursday became the latest in the line of foreign governments to impose sanctions on Libya, including a freeze on the bank accounts of the central bank, the Libyan Investment Authority, the Libya Africa Investment Portfolio and the Libyan Foreign Bank. The United States has also directly targeted the central bank in its sanctions, freezing all of its assets on February 25. In addition, the European Council is expected to hammer out a package of sanctions, including similar freezes on assets of the central bank and the sovereign wealth fund when it meets on Friday.
Reports of a liquidity shortage in the country have also emerged. The UK's Financial Times on Wednesday reported that officials at the central bank's Benghazi offices have been forced to re-circulate old Libyan banknotes, as the panic in the country sparks mass cash withdrawals. The branch is cut off from the central bank's headquarters in Tripoli, which lies in the western part of the country and remains under the control of Gaddafi's government. Benghazi, which is in the east of Libya and is its second-largest city, has fallen to rebel forces, with France on Thursday morning becoming the first country to recognise the Libyan National Council which has set up government there. Gaddafi has in recent days stepped up rhetoric against the rebel base in the city, calling on loyalists to attack it.
The liquidity shortage has been exacerbated by an export control order issued by the UK government on February 27, barring the export of manufactured but as yet uncirculated banknotes to Libya. The notes, which had been ordered and were ready for shipping to Libya, are thought to have been manufactured by De La Rue, a British banknote printing company.