Growth and infrastructure spending plans will be hampered without support from foreign financiers
Liberalisation is the buzzword in Libya today. Since shedding its pariah status in 2004 after the lifting US and European-imposed sanctions, Tripoli has made a lot of noise about plans to liberalise its economy.
Its efforts include a reformation of the banking sector, with the government’s stated aim to make Tripoli a regional finance hub by 2012.
To deliver this, the Libyan central bank began implementing a new strategy in 2007, which is aimed at modernising the banking sector to meet international standards.
That year also marked the first stake sale of a Libyan bank to a foreign investor, with France’s BNP Paribas acquiring a 19 per cent stake in Sahara Bank. In 2008, Jordan’s Arab Bank bought a 19 per cent stake in Wahda Bank.
But, the pace of Libya’s economic reform has been slower than was hoped.
In August, the central bank awarded only one out of two planned licences. In the meantime, the country’s banking sector continues to be dominated by its five state-owned banks.
Yet there is a clear hunger from international lenders to tap into the market.
The government is ploughing $60bn into infrastructure projects in the next few years across a broad range of sectors from power to telecoms, railways and hospitals, all of which represents huge potential for foreign banks to lend their expertise in wholesale banking and project finance.
For the banks their ability to enter the market is being constrained by Libya’s cautious approach to liberalisation. This should be a major concern for Libya as without foreign banks the country’s plans to drive economic growth will be stunted.
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