Watching Libya August 22, 2011 (Update 01:15 CET)

A correspondent - a young person with a financial services background - has just sent us the following comment from Benghazi:

Needless to say the mood is celebratory. Skynews is proving to be the CNN of Iraq for Libya. The current rumour is that Seif Gheddafi has been captured and his brother Mohamed has turned himself in. The fact is that many of our fighters are still in the outskirts waiting for orders. Those who have entered did not face any resistance although there was coordination between the regime's armed forces and their neighbourhoods and they even distributed weapons. We know of many areas that have been already freed and it seems that the regime's men are on the retreat. Gheddafi's latest speech - asking people from outside Tripoli to come to its rescue - indicates sheer despair. Operation 'dawn of the bride of the sea' aka 'dawn of the mermaid' as Twitter revolutionaries have come to call it, is in the final stages.

I suspect that there may be, unless the regime crumbles completely, pockets of resistance that will continue to fight for some time, possibly for weeks. Officially the TNC has announced that Seif has been captured and they have been busily trying to relay the message of a peaceful takeover of Tripoli.

It seems that the Zero Hour Post-Conflict Crisis Coordination (PCCC) plan will be executed soon. The pillar of the plan is to secure Tripoli by deploying the French-trained Libyan personnel to the city en-masse. The plan is to secure government buildings, embassies, banks, public services, key infrastructure, main roads, traffic lights, etc and other key buildings and facilities.  Another main component is the messaging part which should communicate all the key aspects of the plan and instruct the public accordingly.

The financial aspect will be tricky. Firstly, the supply of basic necessiities must be secured : especially fuel for power generation, gasoline and badly needed food. It can be expected that the market will take care of the un-subsidised goods and food.  The bigger challenge, however, will be money. Banks must be opened as soon as possible though we must assume that they have no cash - the currency in circulation is probably under  mattresses of capital holders - a situation similar to that in Benghazi where it has not yet been resolved.

The liquidity crisis in Benghazi has caused the devaluation of the dinar.  The sanctions restricting banks from facilitating international trade fuelled inflation and constrained supply. In Tripoli ordinary citizens in need of cash will not be able to withdraw. This will exacerbate the problem of building confidence in the banks. It is estimated that at least one billion Libyan dinars (LD) will be required to meet withdrawal requirements in the first couple of weeks. Of course, the easy solution would be for the British Government to expedite the release of the 1.8 billion LD printed by De La Rue. If not, in the first few days, we will have to rely on luck and on the social safety net to keep things calm on the financial front.

Watching Libya August 22, 2011 (update 00:15 UTC+01:00)

As we upload this comment, news from various sources in Libya and in Tripoli itself indicate that it is definitely endgame. Opposition forces have entered Tripoli and have joined with rebels in the capital itself. It may be a only a matter of hours before Gheddafi's regime exits from history. If Gheddafi is still in the Bab al-Aziziyah barracks (see our map below), action will now concentrate around this large and very well fortified military base. There are some indications that most of Gheddafi's pretorian guard has already surrendered. On the other hand, as Abdessalem Jalloud, one of Gheddafi's closest allies in the 70s and 80s, has just told Italian state television, Gheddafi is not the sort to go gently into the good night.

Whatever the fate of Gheddafi himself, his family and his closest aides and friends, it is what happens in the next days, weeks and months that is focussing Libya's best minds today. There is certainly a great hunger for democracy, for the rule of law, for better standards of living (yes, the majority of citizens in oil rich Libya yearn for better standards of living), for freedom of enterprise, for an end to rampant and institutionalised corruption, for an education that is freed from the straightjacket of Gheddafi's quaint ideology.

The point, however, is how to move between yesterday and tomorrow. Economics will play as important a role as politics.