Leaders meeting in London stress urgent need to break impasse between Libya’s UN-backed PM and its central bank governor

Western leaders meeting in London have urged key political and economic figures in Libya to come together amid signs that infighting over the conduct of the central bank and the control of oil supplies is driving the country to the brink of economic chaos and authoritarian rule.

The meeting was called at the insistence of the US and followed a public row between Libya’s UN-backed prime minister, Fayez al-Sarraj, and its central bank governor, Saddek al-Kabir. Both Sarraj and Kabir were at the meeting, also attended by the US secretary of state, John Kerry, and the UK foreign secretary, Boris Johnson.

Libya crisis talks held in London as economy 'nears collapse' Read more

Accused of mismanaging the economy and failing to protect the value of the dinar by Sarraj, Kabir had hit back by saying the government failed to produce any coherent economic plan or make use of resources provided by the central bank.

The Italian foreign minister, Paolo Gentiloni, described the meeting as a “significant step forward in addressing perhaps the most important problem that Libya has today, namely a financial crisis that stems from the lack of liquidity – the root cause for tensions”.

A compromise would help the Tripoli government improve oil and gas infrastructure and build stability, he said.

In a statement the US state department said the ministers “called upon all Libyan economic institutions to work together”.

Johnson said: “It is now imperative that the [Libyan government] makes swift progress on delivering public services: electricity in homes and cash in banks, for the benefit of all Libyans.”

In the only recent glimmer of hope for Libya, oil production under the control of the Libyan National Oil Corporation (NOC) has been surging since the Libyan National Army wrested control of the eastern oil terminals.

Facebook Twitter Pinterest Fayez al-Sarraj at the meeting in London. Photograph: Peter Nicholls/AFP/Getty Images

Production rose to 670,000 barrels a day this week, up from the 363,000 in the last week of September. But funds are urgently required to improve pipelines, terminals and oilfields damaged in various stages of the civil wars that have gripped the country since the fall of Muammar Gaddafi in 2011.

The NOC chairman, Mustafa Sanallah, wants to reopen two fields in the south-west of the country whose closure has caused the country a loss of $27bn. His aim is to push production up to 900,000 barrels a day – providing badly needed revenue for a country teetering on economic disaster, lacking any nationwide government and unable to stem the flow of refugees across the Mediterranean.

Four-fifths of Libyan government revenues come from oil, but the distribution of any oil revenues is hampered by the existence of two rival central banks, one in the east and the other in the west. The country has no finance minister.

Sarraj’s Government of National Accord has been unable to form a recognisable government after failing to win popular support in the east of the country. For months, the last Libyan elected parliament, sitting in rump form in Tobruk, has failed to endorse Sarraj’s cabinet appointments. Even in Tripoli in recent weeks, the government has seemed to be on the brink of losing control to a coup.

Currency shortages have also led to long queues at banks despite the delivery of notes from a British money printing company.

The World Bank reported in October that the Libyan economy was on the brink of disaster. It said: “With oil production just a fifth of potential, revenues have plummeted, pushing fiscal and current account deficits to record highs. With the dinar rapidly losing value, inflation has accelerated, further eroding real incomes.”