* Rebels face "critical" financial situation
* In talks for loans from Qatar, UAE
By Deepa Babington
BENGHAZI, Libya, May 2 (Reuters) - Rebels controlling Libya's east are in talks for loans from the United Arab Emirates and Qatar, a spokesman said, as they scramble to avoid running out of funds as the Libyan conflict drags on.
The Benghazi-based rebel interim national council has scraped together enough cash to pay salaries for public workers in April but will struggle to meet May expenses without a fresh injection of funds, spokesman Abdel Hafiz Ghoga said.
"Without the use of the frozen assets or at least loans that will have frozen assets as collateral, our finanical situation will be quite critical," Ghoga told reporters.
"February and March we had no problems, April I think we just about managed it, but if we don't get any financing for May we will be in difficulty."
Concern over how long the rebels can keep up operations and maintain basic services in the east have grown as the war hits a military stalemate, with fighting stalled on the eastern frontline and continued bombardment by Gaddafi forces on besieged towns in the west.
With oil output halted after attacks on eastern oilfields, the rebels have pinned their hopes on being able to tap Libyan assets frozen abroad after Muammar Gaddafi's brutal crackdown on protesters who rose up in February against his four-decade rule.
The issue will be discussed at a meeting of Western and Middle Eastern nations in Rome this week, but experts say any attempt to unfreeze the assets and hand them to the rebels will be complicated and face time-consuming legal obstacles.
"In case the assets to be unlocked take a long time, we will request loans from friendly countries as well as the assistance we're getting from friendly countries," Ghoga said. "We are in the process of getting loans from the Emirates and Qatar."
Qatar and the United Arab Emirates are the only Arab states to participate in military operations in Libya, though the Arab League has supported a no-fly zone.
The rebels have also said Kuwait has agreed to contribute ${esc.dollar}177 million to the rebel council.
Italy's envoy to Benghazi last week said the rebels had only 40 percent of the funds needed to meet expenses for April and May.
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