At the center is the eastern parallel government, operating under the de facto control of Field Marshal Khalifa Haftar, which since 2023 has sustained itself through unchecked monetary financing.
In an exclusive statement sent to Business Insider Africa, Foreign Policy Advisor to the Libyan Prime Minister, Yusuf Kablan said the eastern authority had created “an extraordinary LYD 129 billion in new debt in just two years.”
“For a nation of fewer than seven million people, this pace and scale of debt accumulation is staggering.” he noted.
With Libya’s total domestic debt now at LYD 284 billion, the highest in the country’s history, the question remains: where has the money gone?
Printing Money, Funding Instability
The eastern branch of the Central Bank has financed its operations by creating money “from nothing”, borrowing directly from the public treasury and issuing liquidity without proper controls.
Unlike the Tripoli-based Central Bank, which is bound by international oversight and oil revenue distribution mechanisms, the eastern branch has often bypassed formal financial rules.
It has been accused of “printing money” by borrowing directly from the treasury and injecting liquidity into the economy without proper auditing or balance-sheet accountability.
Deloitte’s forensic audit confirmed billions of dinars were injected into the economy through irregular deposits and currency printing.
“This erosion of the Central Bank’s independence has created a parallel financial system that fuels corruption and destabilises the exchange rate,” Kablan noted.
Wagner and the Web of Regional Conflict
One of the most alarming outcomes of this unchecked financing is the empowerment of non-state armed groups.
The Wagner Group, recently rebranded as Africa Corps, is a Russian paramilitary organization with deep ties to the Kremlin.
Originally active in Ukraine and Syria, it expanded across Africa, embedding itself in conflicts in Libya, Mali, Sudan, and the Central African Republic.
In Libya, Wagner established a stronghold in Al-Jufra, providing military support to Field Marshal Khalifa Haftar’s forces. Its operations are funded through irregular financial flows, natural resource deals, and black-market transactions.
Critics warn that Wagner’s activities entrench instability, fuel regional conflicts, and undermine state sovereignty across Africa.
Kablan warned in his statement: “The same fiscal mechanism that empowers Wagner in Libya is also being leveraged to entrench violent actors in Sudan and across the Sahel.” Reports suggest Sudan’s Rapid Support Forces (RSF) have indirectly benefited from Libyan financial flows, fueling one of Africa’s bloodiest conflicts.
The Shadow Economy and Regional Security Threats
Libya’s instability is spilling across the Sahel, fuelling arms trafficking, migration, and insecurity. Weapons from Libyan stockpiles are moving through Niger into Chad, Mali, and Nigeria. In 2024, Libyan forces dismantled a major cross-border arms ring involving suspects from Sudan and Chad.
Nigeria has felt the impact directly. The Small Arms Survey notes Niger has become a key transit point for Libyan weapons reaching Nigerian traffickers.
Former Director of Defence Media Operations in the Nigerian Army, Maj. Gen. Edward Buba, noted that the proliferation of arms in Nigeria is closely linked to the fallout from Libya’s crisis years ago and the spread of weapons across the Sahel.
“Now, this gave the opportunity for arms to get into the wrong hands and then filtered into our country, which worsened the issue of insurgency and terrorism.” he stated.
The humanitarian cost is also mounting. More than 600 Nigerien migrants were recently expelled from Libya and forced to make the dangerous trek back across the Sahara.
At the same time, Sudan’s conflict is pushing displaced people into eastern Libya, making the country both a destination and a transit hub for migrants heading to Europe.
The UN Security Council has warned that Libya’s turmoil is a “regional crisis multiplier,” driving conflict, smuggling, and migration well beyond its borders. For Africa and Europe, the stakes are high: stability along the Mediterranean and Sahel hinges on addressing Libya’s fiscal disorder.
Kablan stressed that partnerships with Libya must prioritize transparent, accountable institutions “not parallel authorities that thrive on monetary chaos.”
If left unchecked, he warned, Libya risks economic and security collapse within years, unleashing further instability, displacement, and refugee crises across Africa and into Europe.
