Libya

Libya, an oil-rich country strategically located at the crossroads of Africa, the Middle East, and Europe, holds rich yet unfulfilled potential. Following an inconclusive transitional period, Libya remains mired in a political stalemate. The country's complex past, followed by a decade of instability, has resulted in development indicators and institutional capacity that do not align with Libya's status as a middle-income country. Libya's conflict has not only caused significant loss of development gains for Libyans but has also directly impacted the welfare of neighboring countries, the Sahel, and Europe. The oil and gas sector drives the Libyan economy and remains undiversified, with a large public sector.

Libya’s economy remains, therefore, heavily dependent on hydrocarbons, which accounted for 65% of GDP, 93% of exports, and 72% of revenues in 2024, leaving the country highly exposed to production and price shocks. The Central Bank of Libya (CBL) governance crisis in mid-2024 disrupted oil output and widened exchange rate pressures, before its resolution in late 2024 enabled recovery. In April 2025, the CBL devalued the dinar to narrow the gap with the parallel market and safeguard reserves. Despite these steps, the absence of a unified 2025 budget and reliance on monthly allocations continue to constrain fiscal management.

After contracting in 2024, GDP is projected to rebound by 13.3% in 2025, driven by a 17.4% surge in oil GDP, with output averaging 1.3mbpd. Medium-term growth is expected to moderate as oil stabilizes, while non-oil activity expands modestly (+3.4% per year).  Inflation is expected to remain relatively contained at 2% in 2025, reflecting moderating global commodity prices as well as Libya’s generous subsidies system. The fiscal balance is expected to register a surplus of 3.8% of GDP in 2025, while the current account deficit will narrow to about 4% of GDP. Ending the oil-for-fuel swap system in April 2025 is expected to improve transparency and channel more revenue through the CBL.

Social vulnerabilities remain acute. Restriction of spending on essential items (wages and salaries, social transfers) has hindered the capacity of Libyan authorities to undertake reconstruction and developmental projects. Accordingly, service delivery remains weak, especially in health, education, water, and electricity, with stark regional disparities, high unemployment rates, and rising poverty risks. High levels of corruption remain a public concern.

Institutional fragmentation, contested oil wealth management, and a fragile private sector remain structural constraints. The economy is characterized by a large public sector, state-owned enterprises, extensive subsidies, and informality, with limited private sector job creation. Reforms in public financial management, subsidy rationalization, energy sector efficiency, and financial modernization remain critical. Risks stem from deepening political frictions, resumption of conflict, oil disruptions, instability, and climate shocks, while upside potential lies in sustained oil stability, reconstruction, and structural reforms.

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In 2025, the economy grew at a robust rate of 13.4 percent, supported by strong performance in oil and non-oil sectors, recovering from a slowdown in 2024 caused by the Central Bank of Libya (CBL) governance crisis, which disrupted oil output and held overall GDP growth to 1.9 percent. Oil GDP expanded by 17.4 percent, while non-oil sectors expanded by 6.9 percent, mainly due to a surge in private consumption supported by a 4 percent wage growth. Growth prospects over the medium term continue to hinge on hydrocarbons, with production projected to average 1.35 million barrels per day (mbpd) in 2026 and investments targeting a capacity expansion to 2 mbpd by 2030.

Hydrocarbon dependence remains a defining feature of the Libyan economy. In 2025, oil revenues surged by 30 percent, with total government revenues reaching 53.6 percent of GDP. The private sector remains underdeveloped, accounting for only 14 percent of the workforce, and growth is constrained by years of conflict, underinvestment, weak infrastructure, and heavy public-sector dominance.

To foster diversification and reduce vulnerability to oil price volatility, Libya could prioritize reforms to address persistent obstacles to private-sector development. Reforms should rationalize the state's heavy footprint in economic sectors, reduce the pervasive informality of the economy, establish a coherent regulatory framework for businesses, and expand access to credit and foreign exchange. Strengthening the investment climate and improving security conditions would encourage private sector activity in non-hydrocarbon sectors.

Looking ahead, growth is projected to moderate to 4.5 percent in 2026 and 4.0 percent in 2027. The non-oil sector is expected to grow by 4.2 percent, supported by private consumption and a gradual recovery in investment and exports. On the fiscal front, Libya is projected to register a surplus of 5.3 percent of GDP in 2026, while the current account surplus is projected to widen to 23.6 percent of GDP, supported by higher oil prices and increased output. Key risks include political fragmentation, regional conflict, and rising inflation driven by the depreciation of the Libyan dinar. A resolution to the political crisis and the unification of state institutions remain critical conditions for sustained recovery and improved citizen welfare.

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Building successful partnerships: Pooled funding and partnership platforms bring critical benefits for donor coordination and harmonization of objectives, joint leverage in policy dialogue and reform advocacy, impact, efficiency, shared risk management, funding predictability, and monitoring framework. Accordingly, the World Bank Group launched the Libya Development Trust Fund (LDTF) in December 2023 in partnership with the German and the British governments. The overarching goal is to provide a strategic alignment framework for the World Bank Group and its development partners towards Libya's development goals. The LDTF Umbrella program builds on the World Bank's two decades of experience as a development partner for Libya and seeks to leverage its knowledge of the country's past and current economic, sectoral, and contextual challenges.

Giving a Voice to the Youth: Political divisions and institutional fragmentation allow for limited public debate around socioeconomic issues and exclude large portions of the population, mainly the youth. The LDTF partnered with Luiss Guido Carli University and the Mediterranean Universities Union to launch the Youth Economic Research Platform in June 2024. Its objective is to provide an inclusive platform for young Libyans to contribute to discussing their country's economic development trajectory. The platform supports the establishment of a network of young researchers who work on issues related to the Libyan economy.  Additional information on the program can be found here.

Assessing the Failure Modes of the Derna Dams:  Following the devastating floods that hit eastern Libya in September 2023, the World Bank, together with the European Union and the United Nations, developed the Libya Rapid Disaster and Needs Assessment (RDNA). Building on the RDNA, the World Bank, together with the Netherlands, UNICEF, and the International Commission for Large Dams, assessed the failure of the Wadi Derna Dams to provide recommendations for dam safety across the country. The report is set to be published in 2025.

Addressing Drivers of Fragility and Supporting Inclusive Growth: The World Bank team is preparing the Libya Growth and Jobs Report (LGJR) as an opportunity for policy dialogue and a long-term vision in Libya.

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The World Bank Group (WBG) has been supporting Libya for over two decades and is committed to continuing the engagement through technical assistance and analytical services.  The WBG’s program focuses on supporting Libya’s challenging transition towards a sustainable future. To do so, it provides analytical and advisory services that contribute to building transparent and effective country systems; informs local service delivery; and improves the country’s data and knowledge base. A new Country Partnership Framework will support our dialog and help define priority areas.

The WBG support is aligned towards helping Libya address its fragility and move towards peace and political settlements over time. Fostering dialogue about challenges and choices while supporting some of the necessary preconditions for moving forward (data, institutional capacity, cooperation between local and national authorities, international coordination, etc.) is at the heart of the strategy. The engagement prioritizes activities that address drivers of conflict and support resilience.

The development of Libya’s private sector is critical for the country’s sustainable recovery and growth. The International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) have been increasing outreach to the Libyan private sector to identify opportunities to support its development. Starting with a series of diagnostics, IFC activities include supporting the entrepreneurship ecosystem, improving access to finance with a focus on women and medium and small enterprises, and public-private partnerships. MIGA guarantees can play an important role in rebuilding the infrastructure once the political situation allows.

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