After a Decade-Long Hiatus, IMF Surveillance Resumes in Libya

IMF News, June 12, 2023

Source details

Canonical URL: After a Decade-Long Hiatus, IMF Surveillance Resumes in Libya

Libya has been mired in conflict and political uncertainty since the fall of the Ghaddafi regime in 2011, and fragmentation hampered policymaking and the collection of key economic data until recently.
The country has made significant efforts to move forward and overcome economic challenges brought by political conflict.
Recent improvements in data collection, sharing, and transparency enabled the IMF to resume surveillance after a decade-long hiatus.
As IMF surveillance resumes, the IMF will continue to provide policy advice and support to help strengthen the economy and prepare for post-conflict rebuilding.

The Central Bank of Libya has maintained a large stock of international reserves, supported by a fixed exchange rate, capital controls, and various temporary arrangements; this helped the country manage exceptional swings in oil production and revenues post-revolution.
Libya has vast oil and gas reserves and one of the highest GDP per capita levels in Africa.
Hydrocarbon production:
- Makes up around 95 percent of exports and government revenue.
- Projected to grow by about 15 percent in 2023, following an increase in activity after an oil blockade limited production in 2022.
Key challenge: diversify away from oil and gas while fostering stronger and more inclusive private sector growth.

Libya needs an economic strategy that clearly articulates a way forward and rallies public support to:
- Optimize the use of oil revenue to diversify the economy.
- Break away from Ghaddafi-era policies that fostered rent-seeking behavior, corruption, and government opacity.
Success of reforms depends on:
- Achieving a stable political and security environment.
- Developing institutional capacity.
Structural reform efforts should focus on strengthening institutions and the rule of law.
Fiscal policy guidance to guard against risks from lower oil revenues and potential loss of reserves:
- Authorities should avoid spending more when the economy is doing well and save for times when the economy might slow down.

Government spending is dominated by public sector salaries:
- Around 2.2 million people—one-third of the population—notionally employed by the public sector.
Subsidies and grants amount to around one quarter of spending.
Fuel subsidies are particularly problematic:
- The domestic price of gasoline at US 3 cents per liter, the second lowest in the world.

By the Libya team, IMF Middle East and Central Asia Department; June 12, 2023.