Press Release No. 25/376

Washington, DC: A staff team from the International Monetary Fund (IMF) led by Ms. Stephanie Eble visited Tunis during November 10-14, to discuss Libya’s recent economic developments, the macroeconomic outlook, and the authorities’ reform priorities. At the conclusion of the visit, Ms. Eble issued the following statement:

GDP growth in 2025 is supported by an increase in oil production, while fiscal spending remained high. Ongoing political divisions have prevented the adoption of a unified budget, resulting in continued unrestrained spending that follows already very high spending in 2024. This has kept the fiscal and current accounts deficits large, putting pressure on central bank reserves and underpinning the gap between the official and the parallel exchange rates. Despite those pressures, international reserves have remained at comfortable levels. Reported inflation remains low.

The outlook is subject to high uncertainty with risks tilting to the downside. Twin fiscal and current account deficits are expected to persist over the medium term. Risks mainly relate to further uncontrolled spending and the ongoing political fragmentation. Moreover, given Libya’s dependence on oil revenue until the economy can diversify its sources of growth, adequate investment in the oil sector is needed to maintain current production levels.

Accordingly, agreement on a fiscal spending envelope that is consistent with internal and external balance is Libya’s top policy priority. This should be done in the context of a unified budget.

A unified budget needs to be supported by comprehensive spending reforms. In this regard, the recently launched centralized instant wage payment platform is a welcome step towards enhancing transparency, reducing corruption, and strengthening control over the wage bill. The authorities are encouraged to make this platform the main channel for wage payments and to expand this reform to other spending categories. It is also important that any future investments are guided by a transparent, prioritized multi-year investment plan, aligned with available fiscal space and the economy’s absorption capacity. Tackling the long-overdue subsidy reform also remains an important policy priority.

The CBL has taken steps to limit the pressures of high fiscal spending on the exchange rate. It has injected foreign currency liquidity and issued new licenses to exchange bureaus to formalize the market. Additionally, the withdrawal of counterfeit notes was completed in September, which would help preserve the integrity of the payment system.

Furthermore, it has increased reserve requirements to 30 percent, liquidity ratios to 35 percent and introduced new Sharia-compliant investment certificates to absorb excess liquidity. Additional monetary policy tools are essential to enable the central bank to manage excess liquidity and react proactively to the changing macroeconomic condition. Staff look forward to the financial inclusion strategy that will support the CBL’s efforts to further expand digital payments It is important to underscore that against the challenging economic context, preserving central bank independence is essential to maintain financial stability and market confidence.

The IMF remains committed to extending capacity development to the Libyan authorities to address some of these challenges, including national accounts, price statistics, monetary policy tools, public financial management as well as banking supervision. Staff particularly welcome the CBL’s initiative to participate in the IMF’s Central Bank Transparency Code, which can help bolster its framework for transparency and accountability in line with good international practices.

 

The staff team looks forward to the upcoming Article IV discussions, which are expected to take place in the spring of 2026.

The mission thanks the Libyan authorities for the constructive policy dialogue and productive collaboration.