Libya's prosecutor general has ordered the arrest of four more officials, bringing to 12 the number held as part of an inquiry into this month's flood that killed thousands.

Flooding caused by hurricane-strength Storm Daniel tore through eastern Libya on September 10, leaving at least 3,893 people dead and thousands more missing.

The seaside city of Derna was the worst-hit in the flash flood, which witnesses likened to a tsunami. It burst through two dams and washed entire neighbourhoods into the Mediterranean.

The four additional suspects, including two members of the Derna municipal council, were arrested for suspected "bad management of the administrative and financial missions which were incumbent upon them," said a statement issued overnight on Thursday-Friday by the prosecutor general's office in Tripoli, western Libya.

On Monday the office ordered the arrest of eight officials, including Derna's mayor who was sacked after the flood.

Libya's prosecutor general Al-Seddik al-Sour belongs to the internationally recognised administration in the country's west. Another, in the flood-stricken east, is backed by military strongman Khalifa Haftar.

On Friday the eastern authorities said they would begin paying compensation to people affected by the disaster, which a UN agency has said uprooted more than 43,000 people.

"Cheques have been handed over to the mayors" after a relief committee received records of damage caused by the flooding, the government based in Libya's east said in a statement.

People whose homes were destroyed would receive 100,000 dinars (US$20,500) in compensation, Faraj Kaeem, the eastern administration's deputy interior minister, said separately.

Those with partially destroyed homes would get 50,000 dinars, while those who lost furniture or household appliances would be given 20,000 dinars, he said.

Libya has been wracked by division since a Nato-backed uprising toppled and then killed longtime dictator Muammar Kadhafi in 2011.

The eastern administration announced on Wednesday the creation of a fund for the reconstruction of Derna, and confirmed it would host an "international conference" on October 10 to aid the port city's reconstruction.

The authorities have yet to specify how the new fund will be financed, but the eastern-based parliament has already allocated 10 billion dinars to reconstruction projects.

Libya's economy is plagued by corruption.

On Thursday during talks with the European Commission, the United Nations' envoy, Abdoulaye Bathily, said he had called for funds to be monitored.

"I... emphasised the need for a joint assessment of reconstruction needs of storm-affected areas to ensure the utmost accountability in the management of reconstruction resources," he said on X, formerly Twitter. (AFP)