The slow and non-transparent process for letter of credit (L/C) approval in Libya is prompting most firms to use European banks when they do business on L/C terms with counterparties in Libya, the US state department says in its latest analysis of the North African country's investment climate.

It says that difficulties with L/Cs is just one factor contributing to Libya's difficult investment environment, despite the high potential for domestic and foreign investment in the country due to its reconstruction needs, unmet consumer demand, and rich natural resources.

European banks

Most firms seeking to receive payment for services and products in Libya operate using L/Cs facilitated through foreign banks, often based in Europe.

Foreign energy companies remitting large sums often make arrangements for direct transfers to accounts offshore.

Although the recently unified exchange rate simplified trade decisions, Libya's L/C approval process remains opaque, often resulting in delayed payments.

Libyan L/C challenges

Access to L/Cs in Libya has historically been an issue. The Central Bank of Libya (CBL) controls access to all foreign currency in Libya, and it provides Libyans access to hard currency by issuing L/Cs.

But the slow and non-transparent process for L/C approval remains a significant concern for international companies operating in Libya and Libyan private businesses.

CBL difficulties

Difficulties with the CBL itself is also an issue. It split in 2014 between its eastern and western branches as a result of the civil conflict.

In August 2023, the CBL announced reunification, though practically the Tripoli and Benghazi branches remain divided in terms of processes and financial infrastructure.

The US state department's 2024 Investment Climate Statements: Libya can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.