Libya economy gets new boost as cash withdrawal limit lifted

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A Libyan bank cashier gives a client outdated bank notes, which were removed from circulation several years ago and reissued recently by the central bank due to cash shortage, at a bank in Tripoli. Photo - Mahmud Turkia/AFP/Getty Images

Authorities in Libya announced on Thursday the scrapping of a limit on cash withdrawals, as part of plans to rebuild confidence in its banks amid liquidity crisis stemming from last year’s war.

“We have lifted the ceilings … There are no limits any more,” central bank governor Saddek Omar Elkaber told reporters. “There are no problems with liquidity, it is going the right way.”

The oil rich country faced an acute cash crisis when banks were hit by record cash demand during the eight-month uprising that ended Gaddafi’s 42-year rule.

A central bank official said the limit was 2,000 Libyan dinars ($1,560) per month before the announcement.

“The central bank of Libya calls on all citizens, businessmen, companies … in all sectors to not hesitate in putting their money in banks,” Elkaber said in a statement.

The central bank is taking desperate measures to restore liquidity in the Libyan banking system, which officials insist was depleted of its dinar reserves when Gaddafi’s fleeing entourage seized 3-4 billion dinars from the central bank. The problem got acute when people drew huge amounts of cash from the banks during the rebellion.

Libya’s interim administration says it is working to amend its banking laws to attract foreign investment and stimulate its private sector following the war.

Elkaber said various committees had been set up to look into issues such as interest rates as well as introducing Islamic banking in the oil-producing nation.

“A committee is studying the issue of interest rates and will make recommendations to the government,” he said. “We also have a committee looking at how to introduce Islamic banking.”

Demand for Islamic financial services in Libya is attracting attention from a wide segment of the population, many of whom withdrew their money during the revolution because of widespread looting, unrest and imposition of banking controls.

Libya’s interim government announced in April it is introducing a law that will allow the establishment of stand-alone Islamic banks in order to attract cash and rebuild the war-torn economy.

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