Libya's central bank has started withdrawing old currency in an apparent attempt to restore liquidity into the country's banking system after it found that the vast majority of funds are being kept outside banks.

"One of the biggest implications in the economy is the increase of the percentage of money in the market outside the banks which is in excess of 15 billion dinars or 96 per cent of available money," Saddeq Omar Elkaber, governor of the central bank told reporters on Friday, January 13.

"The bank has started printing a new Libyan currency to replace exist notes," he added.

ElKaber said that the central bank has set a timeline for withdrawing the old currency starting with the fifty dinar note, the highest value banknote.

"The bank is asking the Libyan banks to accept or facilitate the handover by accepting the fifty dinar banknotes," Reuters quoted ElKaber as saying.

Media manager of the Central Bank, Issam Buajila, told AFP, that the one- and 20-dinar notes will be phased out because these images remind the Libyans of the time of the dictatorship.