IMF Staff Concludes Visit to Libya

IMF News, November 20, 2023

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The mission expressed deepest condolences to the people of Libya for the tragic loss of life and widespread devastation caused by flooding in September.
Estimates of the damage due to the floods are not available yet; the impact on measured GDP is likely to be relatively small given Libya’s economy is largely dependent on oil and gas production.

Medium-term outlook: Remains positive due to the projected high oil prices.
Short-term fiscal need: Libya requires a budget to support policy credibility, because untargeted fiscal spending complicates the implementation of macroeconomic policy.

Short term:
- Adopt a clear budget to support policy credibility.
- Reduce untargeted subsidies to free resources for better-targeted social spending and productive investments.
Medium term:
- Develop an economic strategy to diversify away from hydrocarbons and foster stronger and more inclusive private sector-led growth.
Longer term:
- Strengthen institutions.
- Upgrade the anti-money laundering combating the financing of terrorism (AML/CFT) framework.
- Address corruption and governance concerns.
Conditionality: Progress in modernizing fiscal and monetary policy frameworks will, to a large extent, depend on the pace of political reconciliation.

Announced central bank reunification has led to welcome improvements in banking supervision and monetary policy coordination.
Immediate benefits from the August announcement include improved coordination in monetary policy, banking system liquidity, and supervision.
Next steps for full reunification:
- Integrate the payment system.
- Unify the central bank’s organizational structure and accounting procedures.
Institutional improvement noted: Establishment of the High Financial Oversight Committee with representation from the East and the West to allocate fiscal resources; this is an improvement but needs to evolve towards a budgetary process in line with global best practices.

Notable progress observed in:
- Improving data collection.
- Enhancing the AML/CFT framework.
- Fintech innovation.
- Aligning banking supervision with international standards and best practices.

Current IMF capacity development areas provided to Libyan authorities:
- Public financial management.
- Monetary and financial statistics.
- National accounts.
- Tax.
- Customs.
- Price statistics.
Future capacity development activities include:
- Tax systems.
- Financial sector supervision and regulation.
- Balance of payments statistics.
- AML/CFT.

The next Article IV mission is expected in the Spring of 2024.
The mission thanks the Libyan authorities and other counterparts for their hospitality, constructive policy dialogue, and productive collaboration.

IMF staff statement as of November 20, 2023.