Abdalgader Albagrmi’s office sits above a vault piled high with gold. It’s the dwindling pile of cash next to the bullion, however, that keeps the Libyan rebels’ deputy Central Bank chief up at night.

As that pile shrinks, so too does the chance of funding and sustaining a revolution to oust one of the world’s longest-serving dictators.

If the cash-flow problem “isn’t solved in the next few days, there’s going to be a problem here”, Albagrmi said, speaking from his office in Benghazi, the north-east Mediterranean port that has become the rebels’ de facto capital.

On Tuesday, Italy pledged hundreds of millions of euros in funds and fuel to the rebels — the latest aid to be promised by a foreign government. But three months into the fight against Libyan leader Muammar Gaddafi, the rebels complain they have yet to see a penny of the hundreds of millions of dollars on offer.

Meanwhile, Libya’s more than $70-billion in assets are unreachable — frozen by United Nations sanctions. Their only export revenue source — oil sales — is at a standstill because of the fighting and, rounding off the problems, Albagrmi says businessmen are hoarding cash instead of depositing it into banks.

“Two weeks, if things continue as they are … and there could be a liquidity crisis,” he said.

The prediction is a troubling one for the rebels, who are locked in a battle against a better-equipped Libyan military, as a shortage of cash has the potential to translate into a crisis of confidence in the civilian National Transitional Council.

The rebel government, from the start, pledged a measure of transparency in its dealings that contrasts sharply with the Gaddafi regime’s opaque policies over the past four decades. Albagrmi was careful from the start of the uprising against Gaddafi on February 15 to make sure that he and others at the Benghazi branch of the Central Bank stayed true to that promise.

“After the revolution, everybody on the street had weapons and I was afraid there could be looting. We prevented that,” he said.

To ensure that life went on normally for Libyans, the central and commercial banks reopened within four days of the start of the uprising and organizers of the revolt, acting on the advice of bank managers, deposited 200 dinars ($160) into every bank account held in the rebel-controlled region.

The cash came from one of two underground vaults encased in double walls and sealed off by a steel door that required three keys to open. Two of the keys were in Benghazi while the third was in Tripoli, the Libyan capital still under Gaddafi’s control.

It took three days to get into the vault, with officials finally forming an eight-man committee to oversee the operation.

‘They will find everything is in order’

In one room, they found Libyan dinars and foreign currency. Albagrmi said he is not authorized to give a precise figure, but said it was between 500-million and one billion dinars. He did not have a precise figure for the foreign currency holdings, but said it “wasn’t much”.

In the second vault was a huge pile of gold bars that some reports have valued at about $1-billion. The bullion is part of what the World Gold Council estimates is Libya’s trove of 143 tonnes of gold in reserve.

Albagrmi said he hasn’t counted the bullion in the Benghazi branch and refused a request by the Associated Press to photograph the cache, saying the eight-member committee would have to be re-formed to accompany reporters into the underground vault.

The deputy Central Bank head said that every effort was made to ensure the money was properly accounted for.

“The rebels didn’t break in and take money — not a single dinar,” he said.” “Any auditor can come in here and they will find everything is in order,” he said.

The gold sits as a tantalising treasure for a de facto government that says it needs a $3-billion infusion to keep afloat, with the money to go toward paying salaries, buying medicine and supplies and powering the country’s eastern half.

Tempting as it might be, however, the gold will go untouched, said Albagrmi. It is what has been preventing the dinar from depreciating even more against the dollar, who’ll give us a loan against it anyway?” he asked.

The Libyan currency now stands at about 1.60 dinars to the dollar, compared to 1.25 dinars to the dollar before the uprising in the east.

The emerging liquidity crunch has helped stoke inflation, with the cost of some goods doubling over the past few months and businessmen forced to pay premiums on foreign currency to complete import deals.

‘Problem of liquidity’

But with the Central Bank in Benghazi dealing with a diminishing supply of dinars, businessmen have been reluctant to deposit money.

“The problem is if I deposit 100 s000 [dinars] today, if I go to the bank tomorrow they’ll tell me they can’t give me any money because of the … problem of liquidity,” said Mustafa Mahmoud, an importer and exporter who runs a hardware store. “The next day maybe they’ll give me 2 000 or 5 000 [dinars]. That doesn’t work for me.”

To help ease the burden on the fledgling government, Albagrmi says the Central Bank has limited withdrawals by individuals to 750 dinars per month, a level he said was “more then enough given the current circumstances”.

But the cash crunch weighs heavily on his mind, especially as “not one dollar has reached us” of the money promised by other countries.

Qatar has pledged $400-million. Kuwait promised $180-million. Other friendly nations, led by France and Italy, promised a fund of at least $250-million last month.

The rebels are asking for loans secured by billions of dollars in assets that were frozen under sanctions imposed on Gaddafi and the Tripoli government.

At first, legal hurdles were blamed for delays in unfreezing the Libyan funds. Weeks later, the question on the rebels’ minds is if the hesitation stems from fears the money would be used to buy arms desperately needed to take on the better-equipped forces loyal to Gaddafi.

Another concern may be that the rebels, despite their best efforts, remain a largely untested quotient.

The rebels have offered no accounting of how they spent the money the provisional government borrowed from the Central Bank. Also unclear is how they spent the roughly $129-million they got from the one tanker of oil they were able to sell with the help of Qatar. Oil sales have since stopped because of damage to the fields from the fighting.

They have also not disclosed what they have done with the millions of dollars donated by Libyans living abroad.

One businessman, who declined to be identified because it was “un-Libyan” to boast about donations, said he came back from England and gave £200 000 ($331 000) to the rebel cause. Rebel officials have confirmed they received the cash.

Despite the challenges — or perhaps because of them — Albagrmi said the rebels have done well, so far.

Benghazi is “an economic paradise” compared to Tripoli, he says. Gasoline shortages in the capital have people lining up for days, with the gasoline costing more than three times the 15 dinars (10 US cents) a liter the easterners still pay.

“It’s a huge achievement, what we’ve accomplished,” Albagrmi said, referring to the financial balancing act they undertake daily. – Sapa-AP