The International Monetary Fund warns Libya of the dangers of a recently-enacted law that would ban interest in financial transactions without having developed a framework for Shari'a compliant institutions.
The IMF, headed by Christine Lagarde, notes that this law would preclude conventional bank landing. The IMF recommends that until institutions are developed that are compliant with the law that its implementation should delayed. Shariah law forbids the paying of interest. However, Islamic banking institutions have developed that are compliant with Shariah law and are growing at a fast rate: "Shariah-compliant assets reached about $400 billion throughout the world in 2009, according to Standard & Poor’s Ratings Services, and the potential market is $4 trillion. Iran, Saudi Arabia and Malaysia have the biggest sharia-compliant assets."
The prohibition of interest on loans was long a feature of Christian theology as well but became increasingly in conflict with the development of capitalism: "Lateran III decreed that persons who accepted interest on loans could receive neither the sacraments nor Christian burial. Pope Clement V made the belief in the right to usury a heresy in 1311, and abolished all secular legislation which allowed it. Pope Sixtus V condemned the practice of charging interest as "detestable to God and man, damned by the sacred canons and contrary to Christian charity."
Theological historian John Noonan argues that "the doctrine [of usury] was enunciated by popes, expressed by three ecumenical councils, proclaimed by bishops, and taught unanimously by theologians." "
In spite of political and security difficulties the Libyan economy grew substantially and there was a budget surplus rather than a deficit last year. In 2011 there was a budget deficit of 18.7% of GDP but in 2012 there was a surplus of 24% of GDP. The cost of producing oil however has gone from a break-even point of $67 US per barrel in 2010 to $74 per barrel in 2012. However, Libyan oil is high quality and commands the highest prices.
The IMF complained about high wage costs in Libya and also subsidies. As usual, these are the typical neo-liberal worries. Investors do not like high wages, and foreign exporters do not like subsidies. Of course consumers and wage earners might have a different view on these matters but the IMF is all about meeting the needs of global capital.
The IMF expects hydrocarbon production to reach pre-conflict levels this year. Production in the non-hydrocarbon area is not expected to reach pre-conflict levels until about 2015 even though growth is strong.
The IMF is pushing for reforms that will make Libya more competitive. They want Libya to cut wages and subsidies so as to spend money on infrastructure. Note that the IMF wants Libya to ensure that the government does not itself invest directly in the domestic economy and crowd out private domestic or foreign capital: They urged the authorities to integrate the sovereign wealth fund system into the fiscal framework and prohibit all elements of the system from participating in domestic investment.
No doubt their will be attempts to privatize the Libyan National Oil Company that accounts for about 70% of all Libyan oil production, is owned by the government, and returns its profits to the government. This is far from an ideal situation from the point of view of global capital. Profits are to go to capital, not governments, or the people. The role of the government is to provide a competitive business-friendly environment in which capital can prosper.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com