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By Aidan Lewis

TUNIS (Reuters) - Libya's U.N.-backed government has formed a board of trustees and appointed directors for the country's contested sovereign wealth fund, moves opposed by others who lay claim to the key financial institution.

The Libyan Investment Authority (LIA), which holds about $66 billion-worth (£51 billion) of mostly frozen assets, is the subject a long ownership struggle in a country where rival factions support different governments.

The fund is a potentially important source of income for Libya, whose economy is in crisis because of conflict, diminished oil revenues and bloated public salary and subsidy bills.

The U.N.-backed Government of National Accord (GNA) said the new board of trustees included the GNA's prime minister, the ministers of finance, planning, and economy, and the governor of the Tripoli's central bank.

They held an inaugural meeting on Saturday, where they appointed a board of directors made up of members of an LIA steering committee that the GNA nominated in 2016.

"Under the new legal framework, the board of directors will have the full authority to deliver the strategic, operational and legal vision of the LIA, by building an institution that is transparent, accountable and neutral," a GNA statement said.

Head of the board of directors, Ali Mahmoud Hassan Mohamed, said: "This positive move forward provides us with the mandate and the authority to continue the reform programme we initiated last year."

The GNA's steering committee nominated last year was challenged by AbdulMagid Breish, who was appointed LIA chairman in Tripoli in 2013, leading to a struggle for control of the LIA's main offices in Tripoli.

Breish, who said the committee was illegal because the GNA has never been endorsed by a parliament based in eastern Libya, won a legal appeal against its creation. He has previously said any attempt by the GNA to set up a board of trustees would be "a blatant abuse of power".

Ali Shamekh, who was appointed chief executive of the LIA by authorities in eastern Libya in 2016, also questioned the latest move by the GNA, saying a board of trustees under Libya's eastern government had already filed a court appeal against the new, rival board.

The GNA said the formation of its boards was in accordance with a law regulating the LIA and that any move to contest it would be "destabilising".

A U.N. report last month pointed to losses due to the failure to reinvest LIA investments that have matured, but concluded that it would be difficult to modify the sanctions regime while the fund remained divided.

(Editing by Robin Pomeroy)

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