Moammar Gadhafi's regime in Libya could run out of money in a few months, his finance minister said in an interview.
Abdulhafid Zlitni that the government was planning to double interest rates in an attempt to persuade people to keep their money in banks and not hoard it, along with other things such as fuel, at home.
He spoke as the most high-profile defector from Gadhafi's government, former foreign minister Moussa Koussa, made his first public statement since fleeing to the U.K.
he feared an escalating civil war could lead to "so much blood" and Libya becoming "a new Somalia."
An African Union cease-fire plan was rejected by rebels Monday amid ongoing attacks by Gadhafi's forces on the city of Misrata and fighting near Ajdabiya in the east, where three rebels were killed in the latest clashes.
The rebels insisted Gadhafi must relinquish power, an idea his son Seif al-Islam dismissed as "truly ridiculous" in an interview with French news channel BFM TV.
However, Zlitni's comments suggested international sanctions were having an effect on the regime.
"At the moment, we have no problem with paying salaries and pensions. Although the bills are heavy, we can pay them," he told the Guardian.
'Very unfortunate'Zlitni then said, "this won't take long — maybe a few months," the paper reported. Asked to explain whether he meant Libya's government running out of money or a resolution to the crisis, he replied: "Both."
"It is a very unfortunate situation. We did not expect this to happen. Things were going very smoothly," Zlitni added.
The BBC asked for an interview with Koussa, but was told he was not ready to give one. However, he did give a prepared statement in Arabic.
'A new Somalia'
"I ask everybody to avoid taking Libya into civil war. This would lead to so much blood and Libya would be a new Somalia," he said.
"More than that, we refuse to divide Libya. The unity of Libya is essential to any solution and settlement for Libya," Koussa added.
Koussa, a former intelligence chief accused of involvement in the 1988 Lockerbie bombing, is currently staying at an undisclosed location after traveling to the U.K. through Tunisia, the BBC said.
The fighting continued in Libya Tuesday, with rebel fighters saying clashes with Gadhafi's forces left at least three dead.
Alaa Abdeljalil, a 35-year-old rebel fighter, said they were killed by a Gadhafi rocket between Ajdabiya and the oil town of Brega Monday evening but their bodies could be retrieved only the following morning.
The rebels took positions 25 miles west of the strategic town of Ajdabiya Tuesday.
The rebels said they had heard an air strike by NATO forces overnight, but could provide no details.
NATO urged to do moreFrench Foreign Minister Alain Juppe on Tuesday accused NATO of not doing enough to protect civilians.
"NATO must play its role fully. It wanted to take the lead in operations, we accepted that," Juppe told France Info radio ahead of travelling to Doha on Tuesday for a Libya contact group meeting.
"It must play its role today which means preventing Gadhafi from using heavy weapons to shell (civilian) populations," he added.
When asked if NATO was doing enough Juppe responded: "It's not enough."
He said NATO should destroy heavy weapons that are bombarding Misrata.
Rebels said the increasingly bloody six-week siege of the city by Gadhafi's troops made talk of a cease-fire meaningless.
Juppe said he would raise the matter in Luxembourg on Tuesday where European Union foreign ministers are to meet and later in the week at a gathering of NATO foreign ministers.
"We need a major effort on humanitarian aid," he said. "The European Union, which did not want to commit to the military operation, must make it its absolute priority to relieve the (civilian) populations," he said, referring to the situation in Misrata.