An International Monetary Fund (IMF) mission held discussions for the 2023 Article IV consultation for Libya in Tunis, Tunisia during March 11-17. The mission issued the following statement at the conclusion of the mission:
We welcome the opportunity to reengage with Libya via an Article IV consultation after a decade-long hiatus. The fragmentation of the country that followed the fall of the Ghaddafi regime in 2011 effectively suspended the production of key economic indicators and complicated policymaking, resulting in difficulties in conducting Article IV consultations. The authorities have recently made commendable progress towards improving data collection, sharing and transparency. Together with the flexibility afforded by the IMF’s new Fragile and Conflict-Affected States (FCS) strategy, this has paved the way for a resumption of Article IV consultations.
Libya’s institutional framework has helped the country through a period of significant macroeconomic volatility and turmoil. There have been exceptional swings in oil production and revenues since 2011. Despite this, the measures taken by the Central Bank of Libya, including the currency’s devaluation, helped maintain a large stock of international reserves. Looking ahead, the stability of the exchange rate will remain an important anchor for monetary policy.
Libya’s economic fortunes will hinge on oil and gas production for the foreseeable future. Hydrocarbon production is projected to grow by around 15 percent in 2023 following an increase in oil production from 1 million barrels per day in 2022 to around 1.2 million barrels per day in 2023, and increase gradually thereafter. Looking ahead, assuming fiscal spending remains contained, the baseline projection is for gradually declining fiscal and external surpluses over coming years. The key risks to the outlook are lower oil prices due to lower-than-expected global growth, and renewed conflict and/or social unrest that leads to disruptions in oil production.
There is an urgent need for a clear economic vision for the country. The speed at which the international community is mobilizing to reduce carbon emissions and recent leaps in clean energy technology pose a risk of disorderly adjustment for economies dependent on oil. Libya is at risk of falling behind these important global trends. Looking ahead, Libya faces the daunting challenge of reducing its reliance on hydrocarbons while fostering stronger and more inclusive private sector-led growth. Structural reform efforts should focus on strengthening institutions and developing a more purposeful and transparent economic strategy for the future. This would be an opportunity to rally the population behind a clear plan to optimize the use of oil revenue to achieve economic diversification and improve living standards and inclusivity.
Distributed by APO Group on behalf of International Monetary Fund (IMF).
