Farhat Bengdara and the Operational Side of Central Bank Independence

Farhat Bengdara took over as governor of the Central Bank of Libya in 2006 with a currency problem everyone could see. Underneath it sat a second job nobody was watching: rebuilding how the bank moved money and deciding who else could compete to move it.

Rebuilding a Payment System From Scratch

Bengdara’s overhaul replaced the bank’s existing payment processes with new systems built to handle both international transfers and domestic settlement, work that ran alongside, not after, the currency reforms that defined his early tenure. Payment infrastructure like this carries real economic weight across the region now. Africa’s 32 live instant payment systems processed close to 32 billion transactions worth about $1.2 trillion in 2022, according to the AfricaNenda State of Inclusive Instant Payment Systems in Africa report. Roughly 400 million people across the continent still don’t have a bank account. Real-time payments added $164 billion to GDP across 40 countries in 2023, according to a report from ACI Worldwide and the Centre for Economics and Business Research, much of it tied to the financial inclusion that follows when transfers get faster and cheaper.

Foreign Banks Enter a Closed Market

Farhat Bengdara’s decision to open Libya to international banks followed a similar logic to the payment rebuild: bring in outside capability the domestic system did not have. Research from the Bank for International Settlements has found that foreign bank entry into emerging markets tends to reduce the incidence of banking crises and improve efficiency, as domestic banks are forced to compete with better-capitalized entrants, without aggravating the boom-bust cycle in lending and capital flows that regulators watch most closely. A separate review from HKUST’s Institute for Emerging Market Studies found that foreign bank penetration promotes financial inclusion in developing economies by easing supply-side constraints on credit, though the effect fades as a country’s income level rises. Libya’s banking sector had operated for years with limited outside competition. That’s about where the inclusion effect tends to run strongest.

New entrants bring underwriting standards, risk management practices and back-office technology they’ve already tested elsewhere, and domestic competitors either adopt comparable practices or lose ground. Opening the door doesn’t guarantee that transfer happens on any particular timeline. It does set the conditions for it, which is the more limited and more defensible claim behind Bengdara’s decision.

Consultants as Institution Builders

“We introduced a new softwares and new systems for payment, international and internal payments, and we make major changes and we brought international consultants like McKinsey, like Booz Allen, like many consultants to help us in reforming the central bank,” Farhat Bengdara said.

Bringing in outside consultants to redesign institutional processes is a long-standing practice in central banking, not a workaround. The IMF lists central banking among its core technical assistance areas, and Libya was one of the 10 founding members of the IMF’s Middle East Regional Technical Assistance Center when it launched in 2004, according to the IMF’s own account of its capacity development work. Bengdara’s approach ran on the same premise: institutions built for an earlier era modernize by importing expertise they lack in-house and redesigning the processes sitting underneath the policy, not by decree.

Consultants of the kind Bengdara named work a common playbook in this type of engagement: audit existing processes against international standards, identify where those processes create bottlenecks or risk, and rebuild them alongside the institution’s own staff rather than handing over a report and leaving. Whether the change survives past the engagement depends largely on that last part. A payment system rewritten by outside advisors and never absorbed by internal teams reverts once the advisors leave. One that gets absorbed becomes part of how the institution is run.

Modernization as a Governance Question

Central bank modernization remains an active research question well beyond Libya. A departmental paper on central bank independence and its role in inflation outcomes across the Middle East, Central Asia and Caucasus was published by the IMF in May 2026. It catalogues the institutional strengths and weaknesses of central banks pursuing reforms of the kind Farhat Bengdara led two decades earlier. Its core argument, that institutional design shapes how well policy tools actually work, tracks the premise Bengdara operated from at the Central Bank of Libya. Payment systems, foreign bank access and outside technical expertise are the infrastructure monetary policy runs on.

Continentally, the picture has moved substantially since 2006. The Pan-African Payment and Settlement System, built by the African Export-Import Bank to link central banks across the continent, now connects 28 countries through more than 190 commercial banks and fintechs and 16 payment switches, a scale of cross-border payment integration that didn’t exist when Bengdara was rebuilding Libya’s own system from the ground up. His direction of travel matches where the continent has since headed: treat payment infrastructure and market access as reforms in their own right, not as afterthoughts to monetary policy.

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