Reuters: World News: Insight: In muddle of Libya's finances, billions go missing

Reuters: World News Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

Insight: In muddle of Libya's finances, billions go missing May 8th 2012, 09:51 By Ali Shuaib and Christian Lowe TRIPOLI | Tue May 8, 2012 5:41am EDT TRIPOLI (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 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. MONEY "NOT MISUSED" 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 hospitals. 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 hotels. Belkheir said his organization 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." (Additional reporting by Hadeel Al-Shalchi in Tripoli and Hamid Ould Ahmed in Algiers; Editing by Peter Graff and Janet McBride) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions