IMF Staff Concludes Visit to Libya

IMF News, December 9, 2024

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IMF staff team led by Mr. Dmitry Gershenson visited Tunis, Tunisia, during December 2–6, to discuss Libya’s latest economic developments, the macroeconomic outlook, and the country’s policy and reform priorities.
End-of-Mission press release date: December 9, 2024.
The mission will not result in a Board discussion; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
The mission welcomes the agreement to resolve the dispute over the leadership of the Central Bank of Libya (CBL), noting the appointment of a new governor and a new Board of Directors as a positive milestone after a decade of Board inactivity.

Staff and authorities are in broad agreement on recent macro developments and outlook.
Following the disruption in oil production in August and September:
- Projected GDP growth and the fiscal and external balances for 2024 have been revised down.
- The GDP growth forecast for 2025 has been revised up to reflect the expected rebound in oil production.
- Medium-term projections remain broadly unchanged.
IMF staff’s baseline forecast is subject to downside risks, including lower-than-expected oil prices and renewed political tensions, which could limit available fiscal space.

It is critical for the authorities to agree on spending priorities through an approved unified budget for 2025.
An approved unified budget for 2025 would help avoid pro-cyclical spending and improve the management of Libya’s resources.
Controlling fiscal expenditure remains the preferred policy approach consistent with Libya’s current macroeconomic framework.

Staff support the CBL’s efforts to facilitate access to foreign exchange and alleviate shortages of local currency.
Recent CBL actions reported:
- The foreign exchange tax was reduced from 27 to 15 percent.
- The central bank raised limits on letters of credit and on allowances for personal use.
- Steps were taken to regulate activities of foreign exchange bureaus.
Exchange rate developments:
- The gap between the official (plus tax) and the parallel exchange rates narrowed from 13 percent in July to 8 percent in November.
CBL is addressing local currency shortages by injecting liquidity into the banking system and expanding electronic payment services.
The banking sector has been raising capital in line with CBL guidelines.
Staff discussed the importance of developing monetary policy tools to help the central bank safeguard the efficient functioning of the foreign exchange market.

Staff reiterated the need for structural and subsidy reforms.
Governance reforms across the public sector were discussed; a planned comprehensive review of governance for the 2025 Article IV could serve as a foundation.
Energy subsidies currently account for around 20 percent of GDP; reforming these untargeted subsidies remains on the authorities’ agenda because they drain resources and limit spending on productive sectors.
Medium-term objective: diversification away from hydrocarbons while promoting stronger and more inclusive private sector-led growth.
Continued progress welcomed on enhancing governance of the banking sector and the AML/CFT framework, improving data collection, and encouraging fintech innovation.

The IMF is committed to offer capacity development (CD) in areas as needed.
In 2024, CD has been provided in the areas of tax policy, budget preparation and revenue administration.
Planned CD activities will focus on national accounts, consumer price index, reserve management, and monetary policy.
The next Article IV mission is expected in April 2025.
The mission thanks the Libyan authorities and other counterparts for their hospitality, constructive policy dialogue, and productive collaboration.

Source: IMF staff end-of-mission press release, December 9, 2024.