Insight: In muddle of Libya’s finances, billions go missing

On May 8, 2012 by stratagem

An internal National Transitional Council (NTC) document paints a picture of a government bureaucracy so fractured and disorganized that nobody appeared able to keep track of what money was coming in, and how much was going out.

Libyan officials say the anomalies in the state’s finances revealed in the document were the result of complex accounting rules, delays in settling bills and poor communication between government departments – not by money being misused or stolen.

But campaigners for financial transparency say that the disarray in tracking government finances creates a fertile environment for abuse to occur, particularly when Libya is now earning over $2 billion a month from selling crude oil.

“The proper management of public finances, especially oil revenues which make up 90 percent of government revenues, is crucial,” said Giulio Carini, a campaigner with the international anti-corruption group Global Witness.

“Any lack of transparency and accountability… fuels mistrust and suspicion that the interim and any future government of Libya is not taking the necessary steps to reverse the past legacy of mismanagement.”

Libya has lacked a strong, central government since the rebellion, backed by NATO jets and missiles, ended Gaddafi’s 42-year rule last year.

International concern about the new Libya has focused on security issues: out-of-control militias clashing with each other, weapons being smuggled across poorly-secured borders, the threat of Libya splitting into regional fiefdoms.

But there is another risk too, that in the muddle of the transition in Libya, millions and possibly billions of dollars in state assets could be misappropriated.

The NTC document, which was obtained by Reuters, relates to state finances several months back, under a government that has since been replaced. Nevertheless, high-profile corruption scandals since then indicate that the government’s shortcomings with keeping track of money have still not been resolved.

ACCOUNTING HOLES

In November last year, the NTC’s economy and finance committee, which provides oversight over the work of the interim government, submitted an internal report on the activities of the oil and finance ministries, the central bank and the sovereign wealth fund, the Libyan Investment Authority (LIA).

The seven-page report was dated 27. Nov, 2011. It listed a litany of accounting holes, and failures by branches of the government to share information about the cash they were handling.

In one passage, the report’s authors said they needed more information to understand how the central bank calculated the $139.9 billion it said Libya held in assets abroad.

“The question is: what is the size of deposits and investments for the central bank alone?” the report asked.

In another section, it took the oil and finance ministries to task over their lack of transparency.

“The (oil and finance) department has not provided monthly reports identifying sources of available financial revenues, their use and the way cash balances are being dealt with,” it said.

The two ministries had “not provided reports on oil export shipments and the amounts collected in return and how the amounts were spent.”

It said also it had received no details on who in the public sector had been paid their wages and how much they were paid.

The NTC said in the document it had reports of “ambiguity” surrounding sales of foreign currency and contracts concluded with brokers and currency traders.

In a different section, the report’s authors addressed the LIA. The document queried $2.456 billion which the LIA said it had handed over to the treasury, but had, it seemed, not shown up on the government’s books.

“When have they (the LIA monies) been transferred to the treasury, how have they paid and to whom have they been paid?” the report asked.

The NTC complained that the sovereign fund was keeping it in the dark on other issues as well. It said the fund provided it with no details on assets held in stocks, bonds or investment funds, including those funds which had registered multi-million-dollar losses.

In the report, the NTC committee said it had no information on why the LIA’s assets had shrunk. “Total (LIA) resources after 2010 allocations were $65 billion, how did it become $62.956 billion?” the report asked.

Read More: Reuters

FYI:

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