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[Dehai-WN] (Reuters): INSIGHT-In muddle of Libya's finances, billions go missing

From: Berhane Habtemariam <Berhane.Habtemariam_at_gmx.de_at_dehai.org>
Date: Tue, 8 May 2012 17:51:57 +0200

INSIGHT-In muddle of Libya's finances, billions go missing

Tue May 8, 2012 9:37am GMT

* NTC document reveals huge sums of cash were unaccounted for

* Leadership kept in dark about own assets, spending

* Officials say problem is miscommunication, not theft

* Chaotic finances allow graft to thrive: campaigners

By Ali Shuaib and Christian Lowe

TRIPOLI, May 8 (Reuters) - - Months after rebels brought down the
extravagant dictatorship of Muammar Gaddafi, the disarray in Libya's state
finances at the end of last year was so bad the new leadership did not know
the size of state assets, how their money was being spent, or what had
happened to more than $2 billion transferred from the sovereign wealth fund.

An internal National Transitional Council (NTC) document paints a picture of
a government bureaucracy so fractured and disorganised 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

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

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


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

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

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.


Asked to comment on the short-comings raised in the report, NTC spokesman
Mohammed al-Harizy acknowledged that "communication is very weak between the
NTC and the government."

He said the NTC had set up a special oil committee, which started work in
April, to improve oversight over crude exports and the revenues earned.

Harizy said there was "no control over the international investments," and
government schemes to provide assistance to people who fought Gaddafi in
last year's revolt have seen cases of corruption at local level.

But at the ministry level, he said: "I don't think the money is being
misused ... The oil revenue is turned over to the finance ministry right
away so I don't think there are problems."

Asked about the allegations of "ambiguity" with currency transactions,
central bank deputy governor Ali Mohammed Salem said: "We had to sell
dollars at a low price in order to bring the cash flow back into the banks."

An LIA official, Mohsen Derregia, told Reuters the authority could not
immediately comment on the NTC document.

Ibrahim Belkheir, the head of the Libyan government audit bureau, said his
office had looked into the issues raised in the report, including the LIA's
financial statements, but he said he could not disclose his findings.

He said though that most of the apparent financial discrepancies raised in
the report could be explained by routine delays between oil export shipments
being delivered and payment being received.

Belkheir, an academic before the revolt, has been given a leading role in
trying to ensure that the pervasive corruption under Gaddafi does not carry
over into the new Libya.

Already there are signs of graft. In one case, the government had to halt a
scheme to give cash to people who fought in last year's rebellion because
the money was being paid out to people who were dead or who never fought.

In another scam, fraudsters enjoyed state-funded vacations abroad by
claiming to be wounded veterans of the fighting needing treatment in foreign

The corner office where Belkheir works is steeped in symbolism. It was
previously used by Hannibal Gaddafi, a son of the ex-Libyan leader famous
for his extravagant lifestyle and raucous parties in five-star European

Belkheir said his organisation would root out corruption wherever it found
it and had not faced any interference from the new authorities. But he
acknowledged he faced a huge task.

"Corruption is not easy to uproot. It is a cultural issue that is prevailing
among certain people," he said. "As they are so used to it, it does not seem
to be corruption to them."

C Thomson Reuters 2012 All rights reserved


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