Damaged buildings after clashes between members of the Libyan pro-government forces, backed by the locals, and the Shura Council of Libyan Revolutionaries, an alliance of former anti-Gaddafi rebels who have joined forces with Islamist group Ansar al-Sharia, in Benghazi, yesterday. Photo: Reuters

Libya’s internationally recognised government said it planned to close several embassies and reduce diplomatic staff to tackle a budget crisis due to the loss of oil revenues.

However, Maltese government sources yesterday said there had been no developments of this nature with regard to the Libyan Embassy at Ta’ Xbiex.

Meanwhile, later yesterday, a parliament set up in Libya to rival the elected assembly stated it hassuspended UN-sponsored peace talks because of what it called new violence from the recognised government.

The assembly, known as the General National Congress, will not participate in any talks inside or outside Libya, GNC spokesman Omar Hmeidan said. Hmeidan said troops allied to Libya’s internationally-recognised government had stormed a central bank branch in Benghazi.

Two governments, allied to rival armed factions, are fighting for control of the country and its oil reserves, four years after the overthrow of Muammar Gaddafi.The violence has cut oil output – the country’s lifeline – to less than 400,000 barrels a day, a quarter of what Libya was producing before the Nato-backed uprising.

Prime Minister Abdullah al-Thinni, forced to work in the east since an armed group called Libya Dawn seized Tripoli and set up its rival Cabinet, said some embassies would close and attachés would be recalled.

“There is a need to reduce spending to tackle the budget deficit as a result of lower oil prices and lower oil production,” Thinni’s Cabinet said in a statement.

Libyans enjoy subsidised bread, airline tickets and petrol

It did not say how many embassies would close.

Last week, the central bank said Libya had posted a budget deficit of 25.1 billion Libyan dinars (€16.05 billion) for 2014.

The bank, which is trying to stay out of the conflict and retain control over the allocation of oil revenues, proposed cutting diplomatic staff, education and other state allowances to tackle what it called a growing budget crisis.

It has said that Libya’s foreign reserves are being drained, without giving a figure. It last estimated foreign currency reserves at $109 billion at the end of June.

Cutting the budget is difficult as most Libyan adults are on the public payroll while the country of six million still enjoys subsidised bread, airline tickets and petrol, a legacy from Gaddafi . It is not clear how Thinni’s government will implement the decision as some embassies had pledged loyalty to the Tripoli-based government.