## 4. External Sector (Content unit: 1lbyea2023001)

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### Context and structural features
- Hydrocarbons account for around 95 percent of exports and government revenue.
- Real GDP per capita is among the highest in Africa due to vast oil and gas reserves.
- Public sector employment: around 2.2 million people receive public sector wages (not including employees of state-owned enterprises), about one-third of the population.
- Subsidies and grants amount to around one quarter of fiscal spending.
- Since 2011 Libya has experienced conflict and political uncertainty; fragmentation among militias persists despite February 2021 support for the Government of National Unity (GNU).
- An East-based competing regime, the “Government of National Stability” (GNS), was formed in early 2022.
- The Central Bank of Libya (CBL) has maintained a large stock of international reserves supported by a fixed exchange rate, capital controls, and temporary arrangements.
- Libya has no public debt in the standard sense and resorts to monetary financing to cover deficits when oil revenues fall short.
- Improvements in data collection, sharing, and transparency allowed Article IV consultations to resume after a decade-long hiatus; feasibility of implementing policy advice remains severely hampered by fragmentation.

### Recent macroeconomic developments — key statistics and facts
- 2020: economy contracted sharply; oil output reduced to about 0.3 million barrels per day; nominal GDP contracted by 30 percent.
- Official exchange rate devalued in January 2021 from 1.44 to 4.48 LYD to 1 USD.
- Parallel-market rate around 4.75 LYD to 1 USD.
- Since January 2021, the official rate has been SDR 0.1555 per LYD 1.
- Inflation: 1.5 percent in 2020; 4.5 percent in 2022.
- Budget surpluses: US$4.4 billion in 2021 and US$6.4 billion in 2022.
- 2022 NOC spending package around US$7 billion, including around US$3.5 billion for development spending expected to increase oil and gas production to 2 million barrels per day over the next 3 to 5 years.
- Fuel subsidies netted against oil revenue in the NOC financial accounts amounted to US$8.5 billion in 2022 (versus US$1 billion reported in fiscal accounts).
- US$5.5 billion in reported development spending for 2022 remains unspent in an account at the CBL.
- Current account: deficit in 2020; surpluses in 2021 and 2022.
- Accumulation of foreign exchange reserves between 2020 and 2022: around US$12 billion.
- Gross official reserves: US$82 billion at end-2022 (more than 200 percent of GDP and covering more than 4 years of imports).
- Libyan Investment Authority (LIA) assets around US$70 billion (under U.N. sanctions since 2011 and not available to the authorities).
- More than one third of imports currently financed outside the banking system using the parallel exchange rate.
- Monetary financing by the Eastern branch of the CBL: around US$1.5 billion in 2023 to finance the GNS.
- CBL provided liquidity against bank balances at its Eastern Branch (close to US$7 billion) as part of reunification.
- Around US$10.5 billion of bank settlement balances estimated to remain in the East.
- CBL reduced minimum local currency cash collateral for issuing LCs from 100 to 30 percent.
- Credit growth: 15 percent in 2021 and 10 percent in 2022.
- Credit remains low at around 11 percent of GDP.

### Outlook and risks — projections and downside scenarios
- Hydrocarbon production and GDP:
  - Hydrocarbon production projected to grow by around 15 percent in 2023.
  - Oil production: 1 million barrels per day in 2022; around 1.2 mbd in 2023; projected to gradually increase to around 1.5 mbd by 2026.
  - Real GDP: projected to grow by 18.8 percent in 2023 after contracting by 11.4 percent in 2022.
- Inflation: annual CPI inflation estimated to have peaked in 2022 and expected to converge to around 3 percent over the medium term.
- Reserves projection: gross official reserves projected to rise from US$85.5 billion in 2023 to US$102.2 billion in 2028, surpassing the previous peak reached in 2014.
- Key downside risks:
  - Global: lower oil prices due to lower-than-expected global growth.
  - Domestic: continued political gridlock leading to renewed conflict and/or social unrest causing disruptions in oil production and significant revenue volatility.
  - Absence of an approved budget and potential higher current expenditures could reduce fiscal surpluses, delay reforms, and put downward pressure on reserves.
  - Longer-term: Libya’s ability to diversify away from oil and gas as the world transitions toward clean energy.
  - Division of the central bank: potential for further monetary financing by the CBL’s Eastern branch could exacerbate liquidity stress, put pressure on foreign exchange reserves, and increase risks of disorderly adjustment.

### Policy framework and strategic priorities
- Overarching need: a clear economic vision and an agreed-upon budget to improve transparency and policy credibility; procyclical spending should be avoided.
- Reform objective: diversification away from hydrocarbons while fostering stronger and more inclusive private sector growth.
- Policy discussion areas: (i) the policy framework; (ii) fiscal policy; (ii) the monetary and financial sector; and (iv) transparency and statistical capacity building.
- Preconditions: success hinges on achieving a stable political and security environment and developing institutional capacity.
- Medium-term economic strategy required to optimize use of oil revenue and achieve diversification; opportunity to signal a break from Ghaddafi-era policies that fostered rent-seeking, corruption, and opacity.
- Diversification approach:
  - Enhance productivity in the hydrocarbon sector while using revenues to improve infrastructure and expand: manufacturing, tourism, agriculture, communications and information, and financial services.
  - Early reforms: eliminate distortions and inefficiencies in markets; improve transparency of public accounts; strengthen governance; promote private sector innovation and growth.
  - Structural transformation should be incremental and require institutional change aligned with private sector development.
- Second-generation reforms: align interests of state, markets, and society; credible commitment to inclusive growth policies; new institutions and laws to protect collective interests; address corruption; modernize institutional frameworks and policy tools; sustained adherence to the rule of law.

### Fiscal policy — key recommendations and diagnostics
- Urgent need for an agreed-upon budget; absence undermines policy coordination and erodes policy credibility.
- Fiscal framework and budget credibility findings:
  - Spending allocations "routinely been increased in an opaque and myopic way with little or no consideration for complications that might arise if oil revenues fall short of expectations."
  - Budgetary process is "myopic and divorced from macroeconomic forecasts."
  - No requirement for fiscal planning nor clear mechanism to establish fiscal policy objectives and spending priorities.
  - The budget functions mainly as a redistributive tool converting oil revenues to public sector wages and subsidies.
- Spending reprioritization:
  - "Spending should be reprioritized to enhance medium-term growth and efficiency."
  - "Procyclical spending threatens macroeconomic stability and intergenerational equity and should be avoided."
  - Scale up development expenditure while considering institutional capacity to enhance efficiency.
  - Reduce distortions from "high public sector wages and subsidies" to improve incentives and resource allocation and foster private sector employment and investment.
- Energy subsidies:
  - Domestic gasoline price currently just US 3 cents per liter (the same level as in 1978).
  - Subsidies are untargeted and fiscally costly; they benefit wealthier consumers disproportionately and contribute to corruption and smuggling.
  - Recommendation: remove subsidies and use revenue gains for targeted social spending and productive investments.
- Public financial management and SOEs:
  - PFM weaknesses: weak cash management controls and oversight; outdated and fragmented legal framework; lack of medium-term focus; predominantly paper-based processes; lack of modern IT systems; practices not aligned with modern international standards.
  - Audit Bureau estimates around 2,000 SOEs.
  - Profit-making SOEs have not paid dividends since 2010; loss-making entities receive budget support to pay wages.
  - Recommendation: streamline ownership structures; create a specialist unit within the MoF to oversee SOEs; consider gradual and selective privatization over the medium term.
- Revenue mobilization:
  - Non-oil revenues are low; comprehensive tax administration reform and tighter customs control needed.
  - Widespread customs duty exemptions with no tight controls; expand targeted post-clearance audits on end-use exemptions.

### Monetary, financial sector and exchange rate policy
- Central bank reunification is crucial for financial stability and private sector development.
- Exchange rate policy:
  - Maintain the currency peg to the SDR and avoid frequent changes to the currency peg to maintain public confidence in the nominal anchor.
  - Official peg: since January 2021 the official rate has been SDR 0.1555 per LYD 1.
  - Historical peg: in June 2003 CBL adopted LD 1 = SDR 0.5175.
  - Staff assessment: REER assessed to be overvalued by approximately 1.7 percent (based on elasticity of -0.3).
- Central bank ownership and conflict of interest:
  - The CBL owns the four major banks in Libya, which account for approximately 70 percent of total banking system assets and 80 percent of total credit.
  - Recommendation: divest central bank ownership of commercial banks or establish strong internal safeguards until divestiture is possible.
- Banking sector resilience:
  - Reported capital adequacy ratio around 16 percent, but impaired by asset impairment recognition and provisioning deficiencies.
  - Over 60 percent of banks’ assets are exposures to the CBL that do not have capital requirements.
  - Risk that shifting exposures to private sector borrowers would quickly erode capital buffers.
  - 2021 devaluation increased value of foreign currency-denominated exposures and caused some banks to breach large exposure limits.
  - Conclusion: banks are likely in need of recapitalization; prepare a roadmap for recapitalization.
- Financial regulation:
  - CBL issued several circulars in 2022 to enhance prudential requirements and progressed towards Basel II and III implementation.
  - New reporting platform completed to improve bank data collection and offsite supervision; pace of reform should be gradual and dependent on capacity.
- AML/CFT and FIU:
  - Strengthen AML/CFT supervision; increase resources and autonomy of the FIU.
  - Low number of SARs and a backlog indicate weak AML/CFT controls at banks and inadequate FIU resources.
- Legal/administrative impediments to credit:
  - Credit intermediation hampered by outdated credit information and property registry problems; authorities urged to develop a plan to reopen the property registry.
- Islamic finance:
  - 2013 prohibition on charging interest remains in place.
  - Banks have struggled to develop Islamic finance products; credit to the private sector only slightly above its 2014 level.
  - Recommendation: develop Islamic finance products and Islamic finance-compliant instruments for liquidity management.

### Data, statistics, and capacity building
- Data provision has serious shortcomings that hamper surveillance, though improvements since 2021 have increased data adequacy.
- Key data limitations: timeliness, quality, frequency, coverage (including geographic), lack of coordination across agencies.
- National accounts:
  - Current structure broadly follows SNA 1993; authorities encouraged to adopt SNA 2008.
  - NBSC published 2006-2019 GDP series and 2020–2021 estimates for the first time since 2014; sources and methods are not clear.
  - Most surveys for national accounts stopped in 2011; last establishment census 2012; last agricultural census 2007.
- CPI and surveys:
  - CPI weights based on HBSs; most recent HBS conducted in 2008 covering Tripoli only.
  - NBSC working on a new HBS covering households across Libya with results expected by mid-2023.
- Government finance statistics:
  - Fiscal data presented in a national presentation somewhat aligned with GFSM 1986; authorities strongly encouraged to adopt GFSM 2014.
- External sector statistics:
  - CBL compiles BOP annually and adopted BPM6; IIP not compiled; authorities encouraged to compile the IIP.
- Monetary and financial statistics:
  - MFS data based on IMF templates and SRFs reported and disseminated.
  - FSIs not yet reported based on the 2019 FSIs Guide; authorities encouraged to compile FSIs.
- Recommended capacity development areas:
  - National accounts, CPI update (using HBS), balance of payments and IIP, government finance statistics aligned with GFSM 2014, expanded FSIs per the 2019 guide.

### Authorities' positions and engagement
- Authorities broadly agree with staff's macroeconomic assessment and that oil revenues are expected to support fiscal and external balances in the short term.
- Authorities acknowledge the urgent need for a clear economic vision and an agreed-upon budget but note political and security challenges to design and implement such a strategy.
- Authorities have removed some food subsidies; plans to reform fuel subsidies face political division and lack of public support.
- Authorities welcome technical assistance on PFM, SOE control, and tax administration.
- CBL and authorities committed to maintaining the SDR peg, enhancing financial sector regulation and supervision, developing Islamic finance products, and eventual divestiture from commercial banks (noting practical difficulties).
- Authorities recognize the need to enhance transparency and statistical capacity and seek further capacity development support.

### Staff appraisal, medium-term outlook and policy priorities
- Libya’s economic fortunes will be tied to oil and gas production for the foreseeable future.
- Assuming fiscal spending remains contained, fiscal and external surpluses are expected to gradually decline; outlook subject to considerable risks related to oil revenue volatility.
- Key medium-term challenges: diversify away from hydrocarbons while fostering stronger and more inclusive private sector growth.
- Priorities: strengthen institutions and the rule of law; develop a clear economic vision; urgently agree on a budget to improve transparency and fiscal management.
- Urgent actions: scale up development spending to alleviate growth bottlenecks and reduce fiscal costs associated with high spending on public sector wages and subsidies; comprehensive PFM reforms to build transparency and institutional capacity.

*Source: 1lbyea2023001 - IMF staff report excerpts (Chapter: 4. External Sector).*

### 4. External Sector ________________________________________________________________________________ 26

### 4. External Sector

### Context
- Libya is heavily reliant on oil and gas production; hydrocarbons make up around 95 percent of exports and government revenue.
- Real GDP per capita is among the highest in Africa due to vast oil and gas reserves.
- Public sector employment: around 2.2 million people receive public sector wages (not including employees of state-owned enterprises), about one-third of the population.
- Generous subsidies and grants amount to around one quarter of fiscal spending.
- Since 2011 Libya has experienced conflict and political uncertainty; fragmentation among militias persists despite the February 2021 support for the Government of National Unity (GNU).
- An East-based competing regime, the “Government of National Stability” (GNS), was formed in early 2022.
- The Central Bank of Libya (CBL) has maintained a large stock of international reserves supported by a fixed exchange rate, capital controls, and temporary arrangements.
- Libya has no public debt in the standard sense and resorts to monetary financing to cover deficits in years when oil revenues fall short of expenditures.
- Improvements in data collection, sharing, and transparency allowed Article IV consultations to resume after a decade-long hiatus; feasibility of implementing policy advice remains severely hampered by fragmentation.

### Recent Macroeconomic Developments
- 2020: economy contracted sharply due to a nine-month oil blockade and a decline in oil prices; oil output reduced to about 0.3 million barrels per day in 2020; nominal GDP contracted by 30 percent.
- Exchange rate and FX market:
  - Official rate devalued in January 2021 from 1.44 to 4.48 LYD to 1 USD.
  - Parallel-market rate around 4.75 LYD to 1 USD.
  - Since January 2021, the official rate has been SDR 0.1555 per LYD 1.
- Inflation:
  - 2020: 1.5 percent.
  - 2022: 4.5 percent.
  - Pass-through muted by appreciation of the parallel exchange rate; government imposed price controls on essential products.
- Fiscal performance:
  - Budget surpluses in 2021 and 2022: US$4.4 billion and US$6.4 billion, respectively.
  - 2022: NOC spending package around US$7 billion, including around US$3.5 billion for development spending expected to increase oil and gas production to 2 million barrels per day over the next 3 to 5 years.
  - Fuel subsidies netted against oil revenue in the NOC financial accounts amounted to US$8.5 billion in 2022 (significantly above number reported in fiscal accounts: US$1 billion).
  - US$5.5 billion in reported development spending for 2022 remains unspent in an account at the CBL.
- External sector and reserves:
  - Current account: moved from a deficit in 2020 to widening surpluses in 2021 and 2022.
  - Accumulation of foreign exchange reserves between 2020 and 2022: around US$12 billion.
  - Gross official reserves: US$82 billion at the end of 2022, more than 200 percent of GDP and covering more than 4 years of imports.
  - Libya also has a sovereign wealth fund (the Libyan Investment Authority, LIA) with assets of around US$70 billion (under U.N. sanctions since 2011 and not available to the authorities).
- Currency leakages and trade finance:
  - CBL provides foreign currency through letters of credit (LCs) issued by banks under CBL oversight.
  - Banks’ liquidity problems and delays in processing LCs have contributed to a large and growing informal sector.
  - More than one third of imports currently being financed outside the banking system using the parallel exchange rate.
- Central bank and banking system:
  - Pressure to revalue the dinar; CBL resisting until political stalemate resolved.
  - Reunification of the CBL started in 2021, stalled mid-2022, restarted by early 2023.
  - Monetary financing by the Eastern branch of the CBL: around US$1.5 billion in 2023 to finance the GNS.
  - CBL provided liquidity against bank balances at its Eastern Branch (close to US$7 billion) as part of reunification.
  - Around US$10.5 billion of bank settlement balances estimated to remain in the East.
- Credit and macroprudential measures:
  - CBL reduced minimum local currency cash collateral for issuing LCs from 100 to 30 percent.
  - Credit growth: 15 percent in 2021 and 10 percent in 2022.
  - Credit remains low at around 11 percent of GDP.

### Outlook and Risks
- Hydrocarbon production and GDP projections:
  - Hydrocarbon production projected to grow by around 15 percent in 2023.
  - Oil production: 1 million barrels per day in 2022; around 1.2 mbd in 2023; projected to gradually increase to around 1.5 mbd by 2026.
  - Real GDP: projected to grow by 18.8 percent in 2023 after contracting by 11.4 percent in 2022.
- Inflation: annual CPI inflation estimated to have peaked in 2022 and expected to converge to around 3 percent over the medium term.
- Reserves projection: gross official reserves projected to rise from US$85.5 billion in 2023 to US$102.2 billion in 2028, surpassing the previous peak reached in 2014.
- Key downside risks:
  - Global risk: lower oil prices due to lower-than-expected global growth.
  - Domestic: continued political gridlock leading to renewed conflict and/or social unrest causing disruptions in oil production and significant revenue volatility.
  - Absence of an approved budget and potential higher current expenditures could reduce fiscal surpluses, delay reforms, and put downward pressure on reserves.
  - Longer-term risk: Libya’s ability to diversify away from oil and gas as the world transitions toward clean energy.
  - Division of the central bank: potential for further monetary financing by the CBL’s Eastern branch could exacerbate liquidity stress, put pressure on foreign exchange reserves, and increase risks of disorderly adjustment.

### Policy Discussions
- Overarching need: Libya needs a clear economic vision and an agreed-upon budget to improve transparency and policy credibility; procyclical spending should be avoided.
- Reform objective: diversification away from hydrocarbons while fostering stronger and more inclusive private sector growth.
- Policy discussion areas:
  - (i) the policy framework;
  - (ii) fiscal policy;
  - (ii) the monetary and financial sector; and
  - (iv) transparency and statistical capacity building.
- Preconditions: success of reforms hinges on achieving a stable political and security environment and developing institutional capacity.

A. Policy Framework
- Need for a medium-term economic strategy to optimize the use of oil revenue and achieve economic diversification; an opportunity to signal a break from Ghaddafi-era policies that fostered rent-seeking, corruption, and opacity.
- Diversification should be the overarching strategic objective:
  - Transition requires enhancing productivity in the hydrocarbon sector while using revenues to improve infrastructure and expand other sectors: manufacturing, tourism, agriculture, communications and information, and financial services.
  - Early reforms: eliminate distortions and inefficiencies in markets; improve transparency of public accounts; strengthen governance; promote private sector innovation and growth.
  - Structural transformation should be incremental and require institutional change aligned with private sector development.
- Second-generation reforms:
  - Align interests of state, markets, and society.
  - Require credible commitment to inclusive growth policies, new institutions and laws to protect collective interests, addressing corruption, modernizing institutional frameworks and policy tools, and sustained adherence to the rule of law.

B. Fiscal Policy
- (Section header present; substantive fiscal policy recommendations follow in the source beyond this excerpt.)

*Source: 1lbyea2023001 - 4. External Sector*

### 23.      There is an urgent need for an agreed-upon budget. The absence of an approved budget

### There is an urgent need for an agreed-upon budget.

### Fiscal framework and budget credibility
- The absence of an approved budget "has undermined policy coordination among key economic institutions and eroded policy credibility."
- Spending allocations have "routinely been increased in an opaque and myopic way with little or no consideration for complications that might arise if oil revenues fall short of expectations."
- Libya "needs a fiscal framework designed to support intergenerational equity by delinking spending from revenue volatility and improving the management of its vast resource wealth."
- Key shortcomings of the current budgetary process:
  - The budgetary process is "myopic and divorced from macroeconomic forecasts."
  - "There is neither a requirement for fiscal planning nor a clear mechanism to establish fiscal policy objectives and spending priorities."
  - The budget functions "as a largely redistributive tool (with oil revenues converted to public sector wages and subsidies) while having only a limited role as a conduit of sound macroeconomic policy."

### Spending reprioritization and subsidies
- Policy recommendations:
  - "Spending should be reprioritized to enhance medium-term growth and efficiency."
  - "Procyclical spending threatens macroeconomic stability and intergenerational equity and should be avoided."
  - "Development expenditure should be scaled up while considering the institutional capacity of the economy to enhance efficiency."
  - Reduce distortions from "high public sector wages and subsidies" to "improve incentives and resource allocation" and "lead[] to an increase in private capital formation and fostering the growth of employment opportunities outside the public sector."
- Energy subsidy specifics and concerns:
  - "The domestic price of gasoline is at the same level as it was in 1978—currently just US 3 cents per liter, the second lowest in the world—and low energy prices are also contributing to widespread corruption at the border and smuggling."
  - Subsidies are "not targeted, benefiting wealthier consumers more than others, and come at a significant fiscal cost."
  - Recommendation: "Removing subsidies and using the resulting revenue gains for better targeted social spending and productive investments would achieve economic diversification and improve living standards and inclusivity."
- Box 1 — Lessons from energy subsidy reforms (country experiences suggest successful reforms include):
  - "A comprehensive plan with clear long-term objectives;"
  - "Transparent and extensive communication and consultation with stakeholders to clearly illustrate the wider benefits of reform;"
  - "Price increases that are gradually phased-in over time;"
  - "Targeted measures to protect the poor;"
  - "Measures to reform the energy sector (especially state-owned enterprises) and support energy-intensive sectors;"
  - "Institutional reforms that depoliticize energy pricing, such as the introduction of automatic pricing mechanisms."

### Public financial management (PFM) and state-owned enterprises
- PFM weaknesses requiring comprehensive reform:
  - "Weak cash management controls and oversight;"
  - "An outdated and fragmented legal framework that lacks clear descriptions of roles, responsibilities, and processes;"
  - "A lack of a strategic medium-term focus in policy making;"
  - "A predominantly paper-based process that evolved over years to address emerging needs but not well-defined in the legal framework;"
  - "A lack of modern IT systems to support decision making, execution, monitoring, accounting, and reporting;"
  - "Practices and tools not in line with modern international standards, such as a comprehensive chart of accounts and a single Treasury account system."
- SOE challenges and recommendations:
  - The Audit Bureau "puts the number of SOEs in Libya at around 2,000, and this number has been growing."
  - SOE ownership and control is "particularly complex"—some SOEs fully owned by the Ministry of Finance (MoF), others owned through government investment vehicles or the central bank.
  - "Profitable SOEs have not paid dividends to the MoF since 2010, while loss-making entities receive budget support to pay wages."
  - Recommendation: "Streamlining ownership structures and creating a specialist unit within the MoF to oversee the SOEs would help to capture their impact on the fiscal position and enhance monitoring and oversight."
  - Over the medium term, consider "a gradual and selective process of privatization that is conducive to private sector development."

### Revenue mobilization and tax/customs
- "Comprehensive tax administration reform and tighter control of customs operations is needed to mobilize non-oil revenues."
- Specific weaknesses and actions:
  - "Exemptions from customs duties, are widespread with no tight controls."
  - Policy measure suggested: "Expanding targeted post-clearance audits on end-use exemptions, along with tighter control procedures at the approval phase, could be a key step towards increasing non-oil revenues."

### Monetary policy, central bank, and banking sector
- Central bank reunification:
  - "The reunification of the central bank would be a crucial step towards achieving financial stability and fostering private sector development."
  - The "ongoing central bank divide between the West and the East, which has increased pressure on the banking system."
- Exchange rate policy:
  - "To maintain public confidence in the nominal anchor, frequent changes of the currency peg should be avoided."
  - Libya "is committed to maintaining its currency peg to the SDR."
  - The exchange rate "serves as a key tool for monetary policy in the absence of conventional instruments."
- Central bank ownership of banks and conflict of interest:
  - "The CBL owns the four major banks in Libya, which account for approximately 70 percent of total banking system assets and 80 percent of total credit provided."
  - Recommendation: "The central bank should take concrete steps towards divesting from commercial banks" or, until divestiture is possible, "establish strong internal safeguards to limit this conflict of interest and ensure that the banks are managed on an arms-length basis."
- Banking sector resilience and recapitalization:
  - At face value, "the capital adequacy ratio is around 16 percent," but this reflects "deficiencies in asset impairment recognition and provisioning."
  - "Over 60 percent of banks’ assets are exposures to the CBL that do not have capital requirements."
  - Risk: shifting exposures from the CBL to private sector borrowers (with positive risk weights) would "quickly erode the existing capital buffers."
  - "The 2021 devaluation of the LYD has also increased the value of foreign currency-denominated exposures and caused some banks to breach large exposure limits."
  - Conclusion: "Banks are likely in need of recapitalization."
- Financial regulation and supervision:
  - The CBL "issued several circulars" in 2022 to enhance prudential requirements and has progressed "towards Basel II and III implementation."
  - A new reporting platform has been completed to improve bank data collection and offsite supervision.
  - Recommendation: "The pace of the reform should be gradual and dependent on implementation and monitoring capacity."
- AML/CFT and Financial Intelligence Unit (FIU):
  - "Strengthening AML/CFT supervision, increasing the resources allocated to the Financial Intelligence Unit (FIU) and enhancing its autonomy, would reduce financial crime."
  - The low number of suspicious activities reports (SAR) and a backlog "indicates weak AML/CFT controls at banks" and "inadequate resources at the FIU to investigate suspicious transactions."
  - Recommendation: "FIU operational autonomy should be enhanced, and its resources increased to deal with SAR filings."
- Legal and administrative impediments to credit intermediation:
  - Credit intermediation is hampered by outdated credit information and property registry problems: "The closure of the property registry in 2011, the lack of ownership records during the Ghaddafi regime, and weak rule of law."
  - "The authorities should endeavor to develop a plan to reopen the property registry as soon as possible."
- Islamic finance and prohibition on interest:
  - "In 2013, the authorities abruptly introduced a law that prohibited charging interest."
  - A decade later, "banks are still struggling to develop Islamic finance products, and credit to the private sector is only slightly above its 2014 level."
  - Recommendation: "Further development of Islamic finance products is needed to mobilize credit" and "the CBL is also yet to introduce Islamic finance-compliant instruments to manage system liquidity and support monetary policy."

### Data adequacy and statistical capacity
- Data shortcomings:
  - "Data provision has serious shortcomings that significantly hamper surveillance."
  - "A lack of coordination among authorities responsible for preparing and disseminating key economic data creates significant delays and inconsistencies."
  - Many economic surveys were paused after the revolution and "have not been restarted due to political instability, funding constraints, and low response rates."
- Capacity development needs and recommendations:
  - "Compiling national accounts estimates in line with the 2008 System of National Accounts would help improve coverage of economic activity and international comparability of data."
  - "The CPI should be updated using the results of the upcoming Household Budget Survey (HBS) to better capture changing consumption patterns."
  - Capacity development for "survey design and improving the quality of estimates" for both national accounts and CPI.
  - "Improvements are also needed in the balance of payments and international investment position statistics."
  - Over time, government finance statistics should:
    - "expand coverage to all government units,"
    - "align revenue and expenditure concepts with the Government Finance Statistics Manual (GFSM) 2014,"
    - "fully reconcile above- and below-the-line data and stocks and flows of assets and liabilities,"
    - "move towards recording fiscal activity on an accrual basis."
  - For the financial sector, produce and publish "an expanded list of financial soundness indicators (FSI) based on the 2019 FSI guide."

### Authorities' views (summary)
- Broad agreement with staff's macroeconomic assessment:
  - Authorities "agreed that oil revenues are expected to support fiscal and external balances in the short term" and that "fiscal restraint is necessary amid continued uncertainty."
  - They noted potential to "increase non-oil revenue by enforcing existing tax and custom laws and by collecting dividends from SOEs."
- Agreement on urgent needs and constraints:
  - "There is an urgent need for a clear economic vision for the country" and "an agreed-upon budget to better prioritize spending over the medium term."
  - Authorities acknowledged that "the ongoing political and security situation make such a strategy difficult to design and implement."
- Fiscal and subsidy reform progress and challenges:
  - "The authorities have successfully removed some food subsidies in recent years."
  - "Plans to reform fuel subsidies have been fraught by political divisions and the lack of public support."
  - Authorities "acknowledge the need for an agreed-upon budget" and "would welcome further technical assistance and capacity development" on PFM, SOE control, and tax administration.
- Central bank and financial sector:
  - Authorities agree "the reunification of the central bank is crucial but faces challenges" and that "the division ... has complicated policymaking and increased risks to financial stability."
  - Libya "is committed to maintaining its currency peg to the SDR."
  - The central bank "is committed to enhancing financial sector regulation and supervision" and agrees "banks need recapitalization."
  - The central bank "recognizes the need to develop Islamic finance products" and "plans to eventually divest from commercial banks," while noting divestiture is difficult in the current environment.
- Data and transparency:
  - Authorities "recognize the need to continue enhancing transparency and statistical capacity" and "remain committed to continued progress on this front with the help of further capacity development support from the Fund and other partners."

### Staff appraisal and medium-term outlook
- Oil dependence and fiscal outlook:
  - "Libya’s economic fortunes will be tied to oil and gas production for the foreseeable future."
  - "Assuming fiscal spending remains contained, fiscal and external surpluses are expected to gradually decline over the coming years."
  - This outlook is "subject to considerable risks, the most important of which relate to volatility in oil revenues."
- Key medium-term challenges and priorities:
  - "The key medium-term challenge is to diversify away from hydrocarbons while fostering stronger and more inclusive private sector growth."
  - Priorities include: "strengthening institutions and the rule of law and developing a clear economic vision for the country."
  - Urgent actions: "Libya urgently needs an agreed-upon budget to improve transparency and better manage its fiscal position."
  - A medium-term plan is needed "to scale up development spending to alleviate growth bottlenecks and reduce fiscal costs associated with very high spending on public sector wages and subsidies."
  - This requires "comprehensive reforms to strengthen the PFM framework with a view towards building transparency, institutional capacity, and strengthening tax administration and compliance."

*Source: IMF staff country assessment excerpt.*

### 53.      To maintain public confidence in the nominal anchor, the central bank should continue

### To maintain public confidence in the nominal anchor, the central bank should continue

### Exchange rate and nominal anchor
- Recommendation: Continue efforts to reunify the central bank and avoid frequent changes to the currency peg to maintain public confidence in the nominal anchor.
- Rationale: Keeping the peg unchanged would allow the central bank to protect foreign exchange reserves and maintain macroeconomic stability amid political and security risks.
- Assessment: In 2022, Libya’s external position was broadly in line with the fundamentals and desirable policy settings.
- Key facts and figures:
  - Official peg: Since January 2021 the official rate has been SDR 0.1555 per LYD 1.
  - Historical peg: In June 2003 the CBL adopted LD 1 = SDR 0.5175.
  - The currency devaluation in January 2021 led to a sharp depreciation of the REER; since then the REER has been relatively stable.
  - Staff assessment: REER assessed to be overvalued by approximately 1.7 percent (based on elasticity of -0.3).

### Banking sector, credit intermediation, and financial stability
- Findings:
  - The central bank introduced wide-ranging regulations aimed at modernizing the financial sector and has made progress improving systems (including a bank reporting platform).
  - Implementation challenge: New regulations must be implemented in an environment of limited capacity.
  - The central bank is the owner of major commercial banks.
  - Reactivation of the property registry is essential for banks to clearly establish borrower creditworthiness.
- Recommendations:
  - Develop a roadmap for recapitalizing the banking sector to better facilitate the flow of credit to the economy.
  - Introduce measures to limit conflict of interest arising from central bank ownership of major commercial banks.
  - For the medium term, prepare a plan to eventually divest central bank ownership in the commercial banking sector.

### Islamic finance and liquidity management
- Findings:
  - There is a 2013 prohibition on interest that the authorities have the option to revisit.
- Recommendations:
  - Encourage banks to develop Islamic finance products to mobilize credit.
  - The CBL should introduce Islamic finance-compliant instruments to help manage system liquidity and support monetary policy.

### Data, statistics, and institutional capacity
- Finding: Data compilation and reporting remain weak, with responsibilities spread over several agencies.
- Recommendation: Capacity development and enhanced information-sharing and coordination across agencies is of crucial importance.

### Article VIII and Fund engagement; Article IV consultation
- Status: Staff is engaging with the authorities to assess compliance with obligations under Article VIII of the Fund’s Articles of Agreement.
- Concern: Potential Article VIII concerns include the existence of a parallel market premium related to restrictions on the provision of foreign exchange.
- Staff position: To the extent any measures are inconsistent with Article VIII, staff will encourage the authorities to either eliminate them or request their approval by the Board, if approval criteria are met.
- Recommendation: Staff recommends that the next Article IV consultation be held on the standard 12-month cycle.

### External sector assessment and policy implications
- Overall assessment: Libya’s external position in 2022 was broadly in line with levels implied by fundamentals and desirable policy settings.
- Current account:
  - Hydrocarbons account for over 90 percent of total exports.
  - Current account balance: deficit of 5.4 percent of GDP in 2021; surplus of 14.7 percent of GDP in 2022 (improvement driven primarily by higher oil prices).
  - Projection: Over the medium-term, a projected increase in hydrocarbon production to 1.45 million barrels per day will offset an expected decline in oil prices to maintain exports.
  - EBA-lite CA model: CA gap estimated at -0.6 percent (cyclically adjusted CA and CA Norm figures shown in model output).
  - Elasticity used: -0.3.
- Reserves and FX:
  - Gross official reserves: US$82 billion at the end of 2022.
  - Reserves equivalent: more than 200 percent of GDP and covering more than 4 years of imports.
  - Projection: Assuming fiscal spending remains contained, reserves are projected to rise further, reaching more than US$100 billion by 2028.
- Policy recommendation: Focus on maintaining exchange rate stability while fostering economic diversification and encouraging private sector competition to ensure external sustainability over the medium term.

### Debt dynamics and fiscal risks
- Key baseline figures (percent of GDP unless otherwise noted):
  - Public debt: 90.5 (2022).
  - Change in public debt: -7.4 (2022).
  - Primary deficit: -23.6 (2022).
  - Noninterest revenues: 100.0 (2022).
  - Noninterest expenditures: 76.5 (2022).
  - Real GDP growth (percent): -11.4 (2022), 18.8 (2023), 8.2 (2024), 7.4 (2025), 4.7 (2026), 2.5 (2027), 2.6 (2028), 2.6 (2029), 2.7 (2030), 2.7 (2031), 2.7 (2032).
  - Inflation (GDP deflator; percent): 26.8 (2022), -6.3 (2023), -2.3 (2024), -1.6 (2025), -0.3 (2026), -0.2 (2027), 0.0 (2028), 0.4 (2029), 0.7 (2030), 0.7 (2031), 0.7 (2032).
- Staff commentary:
  - Under budget law, the central bank can provide advances to the government up to one fifth of estimated revenues in the budget, repayable at fiscal year-end.
  - In recent years the government resorted to monetary financing when oil revenues fell short.
  - According to the CBL, the government was indebted to the CBL to the tune of 90.5 percent of GDP in 2022; this is not debt in the standard sense (denominated in domestic currency, carries no interest, has no repayment schedule, and can be forgiven administratively).

### Risk assessment highlights (selected)
- Domestic risks:
  - Political instability turning into active conflict and oil blockades: High likelihood; expected impact includes endangering fiscal sustainability and exacerbating external imbalances. Policy response: Clearly communicate plans for elections and initiate reforms to target subsidies and share oil wealth more equitably.
  - Wasteful fiscal spending to gain popular support: High likelihood; expected impact is unsustainable fiscal path. Policy response: Phase out broad-based allowances and grants and replace them with targeted social support; increase capital expenditure and structural reforms.
- Global and regional risks:
  - Sharp global growth slowdown with sustained decline in oil and gas prices: High likelihood; expected impact is significant weakening of fiscal and external positions.
  - Commodity price volatility and intensification of regional conflicts: High likelihood; recommended policy responses include energy subsidy reform and targeted support for the most vulnerable.

*Source: IMF staff report excerpts from the chapter/section provided.*

### 1. February 2023: METAC mission on the compilation of Producer Price Indices (PPIs).

### 1. February 2023: METAC mission on the compilation of Producer Price Indices (PPIs).

### Recent technical assistance and mission activity (chronological highlights)
- 1. February 2023: METAC mission on the compilation of Producer Price Indices (PPIs).
- 2. January 2023: METAC mission on the digitalization of the tax administration (Second mission).
- 3. December 2022: FAD/METAC mission on reviewing public financial management framework and identifying reform priorities and further CD needs.
- 4. November 2022-February 2023: FAD Peripatetic advisor for ASYCUDA functionalities development.
- 5. November 2022: METAC mission on the digitalization of the tax administration (first mission).
- 6. August 2022: METAC/FAD mission on the implementation of core custom functions in ASYCUDA World (AW) IT management system.
- 7. August 2022: METAC study tour of Port in Jordan by Libyan officials about the use of customs automated system
- 8. July 2022: STA mission on compiling the monetary and financial statistics for the central bank and depository corporations.
- 9. January 2022: METAC mission on the methodology to update the CPI and developing an indicative roadmap.
- 10. June 2022: METAC mission on good practices of taxpayer register.
- 11. January 2022: METAC mission on budget preparation process and draft budget circular.
- 12. January 2022: METAC mission on the compilation of annual national accounts.
- 13. January 2022: FAD mission on Review of revenue administration reform plan and priorities.
- 14. November 2021: METAC mission to restore core Public Financial Management functions.
- 15. September 2021: METAC follow-up mission on cash forecasting.
- 16. April 2021: METAC mission on cash management

### Assessment of data adequacy for surveillance (key findings)
- Data provision has serious shortcomings that significantly hamper surveillance.
- Since 2021, the authorities stepped up data collection, analysis, and dissemination, which have led to a significant improvement in data adequacy.
- Remaining weaknesses include timeliness of submission, quality, frequency, and coverage of data, including geographical coverage.
- Deficient mechanisms for periodic data collection and sharing between authorities; better coordination is required to improve consistency between national accounts, government statistics, balance of payments, and monetary statistics.
- Financial soundness indicators (FSIs) and the international investment position (IIP) are not compiled.
- National accounts and balance of payments (BOP) data rely heavily on estimates in the absence of many economic surveys and data sources.
- Consumer price index (CPI) is based on household budget surveys (HBSs) that only cover the Tripoli area.

### National accounts and price statistics (findings and recommendations)
- The structure of national accounts statistics broadly follows the System of National Accounts 1993.
- The National Bureau for Statistics and Census (NBSC) published a 2006-2019 time series of GDP and estimates for 2020 and 2021, for the first time since 2014.
- Sources and methods used to compile the estimates are not clear and there is a dearth of data from administrative or survey sources which suffer from low response rate and restricted access to firms.
- Most surveys for national accounts stopped in 2011.
- Last establishment census was conducted in 2012; last “industry” survey was conducted in 2012 (2016 for large establishments); last agricultural census in 2007.
- Major political, economic, and demographic changes have taken place in Libya and there is a pressing need to restart periodic surveys.
- Authorities should adopt the System of National Accounts 2008.
- Additional statistics that could be compiled include import and export price indices, industrial production indices, construction activity, and national disposable income.
- The NBSC compiles and disseminates a consumer price index (CPI) which broadly corresponds to international standards.
- CPI weights are based on periodic HBSs; the most recent HBS was conducted during 2008, covering the Tripoli region only.
- From 2018, the Classification of Individual Consumption by Purpose 1999 (COICOP) has been used to classify the goods and services included in the CPI.
- The current CPI basket needs to be updated to reflect changes in the consumer market and current consumer preferences.
- NBSC is working on a new HBS that will cover households across Libya with results expected by mid-2023.

### Government finance statistics (findings and recommendations)
- Libya’s fiscal data is compiled and presented in a national presentation somewhat aligned with the Government Finance Statistics Manual 1986 (GFSM 1986).
- Revenue is presented based on a breakdown classification of oil revenues that represent more than 90 percent of total revenues, other sovereign revenues (including taxes and customs), and dues from previous years.
- Expenditures are presented according to Five chapters: 1) Wages 2) Operational expenses 3) Developmental projects and programs (investments) 4) Subsidies and 5) Extraordinary/emergency financial arrangements.
- Expenditure data is also presented according to administrative classification, with each entity organized according to the economic classification chapters.
- Authorities are strongly encouraged to adopt GFSM 2014, the current international guideline for fiscal reporting, to provide more standardized, transparent, consistent, and comparable data.
- Authorities are also encouraged to report annual fiscal data for publication in the Government Finance Statistics Yearbook and sub-annual fiscal data for inclusion in International Finance Statistics.

### External sector statistics (findings and recommendations)
- The Central Bank of Libya (CBL) compiles the BOP annually and has recently adopted the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6).
- Some data quality and frequency issues need to be addressed.
- The international investment position (IIP) is not compiled.
- Authorities are strongly encouraged to compile the IIP and improve the data quality and timeliness of the BOP.

### Monetary and financial statistics (note)
- STA has conducted a first TA mission on the monetary and financial statistics to the CBL in August.

*Source: 1lbyea2023001 - 1. February 2023: METAC mission on the compilation of Producer Price Indices (PPIs).*

### 2022. Subsequently, the MFS data based on the IMF’s templates, the Standardized Report Forms

### 1lbyea2023001 - 2022

### Data reporting and standards
- MFS data based on the IMF’s templates, the Standardized Report Forms (SRFs) for the central bank (1SR) and the other depository corporations (2SR) conforming with international standards have been reported and disseminated on the IMF’s website.
- CBL has reported data until 2019 on some key series of the Financial Access Survey (FAS), including the two indicators adopted by the UN to monitor Target 8.10 of the Sustainable Development Goals (SDGs): commercial bank branches per 100,000 adults and ATMs per 100,000 adults.
- Libya participates in the IMF Enhanced General Data Dissemination System (e-GDDS) but does not yet disseminate the economic data recommended under the e-GDDS through a National Summary Data Page.
- Libya: Table of Common Indicators Required for Surveillance (As of February 5, 2023) — selected reported dates and frequencies:
  - Exchange rates: Date of latest observation February 5, 2023; Date received February 5, 2023; Frequency of Data D; Frequency of Reporting D; Frequency of Publication D.
  - International reserve assets and reserve liabilities of the monetary authorities: Date of latest observation December 2022; Date received February 2023; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
  - Reserve/base money: Date of latest observation December 2022; Date received February 2023; Frequency M / M / M.
  - Broad money: Date of latest observation December 2022; Date received February 2023; Frequency M / M / M.
  - Central bank balance sheet: Date of latest observation December 2022; Date received February 2023; Frequency M / M / M.
  - Consolidated balance sheet of the banking system: Date of latest observation December 2022; Date received February 2023; Frequency M / M / M.
  - Consumer price index: Date of latest observation December 2022; Date received January 2023; Frequency M / M / M.
  - Revenue, Expenditure, Balance and Composition of Financing – General Government: Date of latest observation December 2022; Date received January 2023; Frequency M / M / M.
  - Revenue, expenditure, balance and composition of financing – central government: Date of latest observation December 2022; Date received January 2023; Frequency M / M / M.
  - External current account balance: Date of latest observation December 2021; Date received March 2022; Frequency Q; Frequency of Reporting I; Frequency of Publication I.
  - Exports and imports of goods and services: Date of latest observation December 2021; Date received March 2022; Frequency Q; Frequency of Reporting I; Frequency of Publication I.
  - GDP: Date of latest observation December 2021; Date received March 2022; Frequency A; Frequency of Reporting I; Frequency of Publication I.
  - Gross external debt: Date of latest observation December 2021; Date received March 2022; Frequency A; Frequency of Reporting I; Frequency of Publication I.
  - Notes/footnotes included in the table:
    - Libya prohibits interest since 2013.
    - Foreign, domestic bank, and domestic nonbank financing.
    - No public debt.
    - Frequency codes: Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available (NA).

### Financial sector surveillance and indicators
- The CBL publishes a limited set of financial soundness indicators (FSIs) but has not yet reported to STA the FSIs based on the 2019 FSIs Guide.
- Authorities are strongly encouraged to compile and report FSIs.

### Political and institutional context — key findings
- Libya is emerging from over 10 years of internal political strife and a costly civil war with severe damage to physical and human capital.
- Political fragility has been compounded by external actors participating in Libya’s conflict, aggravating the crisis.
- A relatively calm political climate has prevailed since early 2021, but nation-wide political cohesion remains incomplete; democratic elections initially planned in December 2021 were postponed because of disagreements over the legal framework for elections.
- The Government of National Unity (GNU) and the Tripoli-based CBL are recognized by the international community and the Fund; policy dialogue is conducted with CBL and GNU representatives, with CBL-Al Bayda representatives participating as part of the CBL team.

### Economic context and outlook
- Oil and gas production and exports have been the core of Libya’s economy for decades; pre-2011 authorities did not optimize natural resource endowment to build a dynamic market-oriented economy.
- The economy experienced wide swings due to fluctuations in oil production, exports and prices, and periodic stoppages of oil production and exports due to blockades.
- In 2020 oil production and prices fell sharply because of blockades and pandemic-related demand destruction; procyclical spending mitigated revenue shortfalls but produced high fiscal and current account deficits and loss of reserves.
- With strong recovery in oil production and prices in 2021 and 2022, the economy rebounded sharply with sizable fiscal and external surpluses and increased reserves.
- Authorities plan to increase oil production gradually from 1.2 million barrels per day (mbd) in 2023 to around 1.5 mbd by 2026; further increases will depend on major investments, world demand, and OPEC’s role.

### Fiscal management — findings and reform orientation
- Budget outcomes are driven by spending on wages and benefits, basic government services, untargeted subsidies and transfers to loss-making state enterprises.
- The budget functions as a redistributive vehicle at high cost; 90 percent of all workers are notionally employed by the public sector.
- Domestic energy prices are heavily subsidized and uniformly priced across the country; the GNU has paid salaries of public sector employees in areas controlled by the parallel government.
- Fuel subsidy is highly regressive and fuels smuggling to neighboring countries where fuel prices are higher.
- The National Economic and Social Development Board of Libya submitted a subsidy reform proposal to the GNU suggesting a roadmap for gradual removal of subsidies and improved targeting of direct cash transfers.
- Non-oil revenues comprise only 2-3 percent of GDP, though there is limited short-term potential to increase customs and tax revenue through better enforcement and administration.
- Libya received Fund TA in 2020 in tax and customs administration; authorities have requested Fund technical assistance in designing a VAT.

### Monetary and exchange rate management
- Monetary developments are driven by large swings in net claims on government as the government resorts to (interest free) monetary financing to meet budget shortfalls.
- Monetary management is complicated by the parallel government’s borrowings from CBL-Al Bayda and printing bank notes outside CBL-Tripoli control.
- The CBL has no instruments to control monetary aggregates; since the 2013 prohibition on interest, commercial banks set their own internal lending rates.
- The CBL intends to develop Islamic finance products and has requested Fund TA.
- Exchange rate regime:
  - The official rate remained pegged to the SDR, with a parallel market developing after 2015 following capital controls.
  - The official exchange rate was formally devalued in relation to the SDR in January 2021; the gap narrowed and remained small thereafter.
  - The CBL considers the SDR peg at current levels appropriate and intends to maintain it, resisting political pressures to revalue as oil market conditions improved.
  - The CBL imposed a tax on FX transactions to close the rate gap prior to the formal devaluation.

### Financial system — recent actions and plans
- The CBL maintained financial system functioning during the political and economic turmoil.
- Reunification progress between Tripoli and Al-Bayda CBL branches has been uneven; the CBL is committed to completing reunification as a first critical step in banking sector reform.
- Over the last three years the CBL has focused on:
  - developing the AML/CFT framework;
  - expanding e-payment services;
  - enhancing banking regulations, systems and tools;
  - increasing transparency and disclosure; and
  - improving commercial bank reporting.
- The CBL plans to review bank recapitalization requirements and intends to disinvest from commercial banks under its ownership gradually over the longer run.
- Authorities found the Selected Issues Paper on banking sector reform useful and will seek scaled up support from the Fund and other development partners to develop the financial sector and promote financial inclusion, especially of women and youth.

### Economic diversification and institution building
- Authorities recognize the need to reduce reliance on energy production and exports and the volatility of international oil markets, but face daunting challenges given historic neglect of diversification.
- Libya needs a clear, comprehensive long-term plan and a shared vision for development to lay foundations for a new social contract.
- Institution building is the first priority; authorities have engaged actively with the World Bank and other development partners to identify challenges, needs, and policy options for recovery and long-term transformation.
- The authorities entered an agreement for reimbursable advisory services with the World Bank Group to improve the primary health system and health financing.
- Authorities intend to learn from successful experiences and avoid pitfalls of other major oil producing countries in diversification efforts.

### Data deficiencies, technical assistance and capacity building needs
- Libya has major data shortcomings limiting economic analysis and evidence-based policymaking, despite recent improvements and better coordination among data agencies.
- Authorities will continue to rely on Fund technical support and capacity building in data collection and dissemination.
- Requested TA and CD needs — CBL-related:
  - Islamic financing instruments;
  - macroprudential tools;
  - payments system strategy;
  - central bank transparency;
  - CBDC and FinTech.
- Requested TA and CD needs — Ministry of Finance, Ministry of Economy, Ministry of Planning:
  - national accounts;
  - macro-fiscal framework and forecasting techniques;
  - tax and customs administration;
  - treasury single account;
  - SOE management;
  - subsidy reform;
  - VAT design.

### Concluding remarks and policy orientation
- Holding the Article IV consultation after a 10-year pause is a major step toward re-engaging Libya with international financial fora.
- Data deficiencies and limited implementation capacity constrain follow-up on staff policy advice, but authorities consider the consultations useful for highlighting institutional development and challenges to reestablish political and social cohesion.
- Future reports are expected to build on this first report as data improve, policies are formed, and implementation capacity expands.
- Libya’s vast mineral resources could support rebuilding institutions and financing major investments in infrastructure and human capital critical for a prosperous, inclusive Libya.
- A strong, stable, and prosperous Libya would yield positive spillovers to neighboring countries and the broader international community; promoting political, social and economic stability in Libya is framed as a global public good.

*Source: 1lbyea2023001 - 2022 (Libya 2023 Article IV Consultation materials).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1lbyea2023001.pdf_