Skip to Main Navigation


Libya entered 2020 as a divided nation, with competing political and military factions operating redundant and often conflicting systems of governance. The Government of National Accord (GNA) controlled western Libya around the capital Tripoli, while the Interim Government (IG), backed by the Libyan National Army (LNA), controlled most of the east, central and southern parts of the country. These entities operate on separate budgets, with the Central Bank of Libya divided into parallel branches with the Central Bank of Libya in Tripoli controlling the money supply and foreign reserves and the branch in the east mimicking its currency printing function.

For the most part of 2020, the performance of the Libyan economy was the worst in recent record. In January 2020, the country was hit by a nine-month oil blockade, which cut oil output to about 228,000 barrels per day. This was less than a sixth of 2019 and comparable to country’s lows during the civil war after 2014 but it manifested itself much faster than that. The blockade was debilitating for Libya’s acutely undiversified economy, which counts on oil and gas for over 60% of aggregate economic output and over 90% of both fiscal revenue and merchandise exports: revenue lost from the blockade amounted to around US$11 billion for the year, according to the Central Bank in Tripoli. Including non-oil effects of the oil blockade, the total fiscal revenues stood at 23 billion Libyan dinar (LYD) in 2020, some 40% of the total revenue earned in 2019. These problems were conflated by the COVID-19 pandemic, which inflicted further economic and social dislocation on a war-torn country with little in the way of basic health services and infrastructure.

The plunge in revenues knocked government spending. The Tripoli-based government cut total expenditures by 22% to LYD 36.2 billion in 2020 from LYD 46.1 billion in 2019. Wages and salaries (Chapter 1 expenditures) accounted for the bulk of expenditures for the year; LYD 21.9 billion or 61% of total expenditure. Cuts of 40% salaries for high-ranking political officials were announced, starting in January 2020, and that of all public sector employees by 20% from April 2020, but it is not clear whether these decisions were implemented or not. Subsidies (Chapter 4 expenditures) reached LYD 5.6 billion, or 16% of total expenditures. Development expenditures (Chapter 3 expenditures) were miniscule for the year—LYD 1.8 billion or 5% of total expenditure, compared to LYD 4.6 billion in 2019. All capital expenditure projects for 2020 were almost completely scrapped.

A recent array of negotiations and agreements points to a way forward after a decade of military conflict and political strife. Following the ceasefire agreement between the GNA and the LNA, the U.N. Support Mission in Libya confirmed in mid-November 2020 that the GNA and the LNA had agreed to hold parliamentary and presidential elections in December 2021. The breakthrough was achieved by 75 Libyan delegates at the Libyan Political Dialogue Forum  in Tunisia, with a three-member Presidency Council, headed by Mohamed al-Mnefi, and a Prime Minister, Abdelhamid Dabeiba, given the task of forming a Government of National Unity that will in turn prepare Libya for general elections. In addition to these developments, several economic agreements have also come to fruition.

There is cautious optimism of recovery and healing but downside risks abound. The ceasefire agreement of October 2020 stipulated that all military units and armed groups withdraw from the front lines and foreign fighters and mercenaries transfer to Tripoli and Benghazi before leaving Libya by January 23, 2021. The country’s underlying political and economic division, however, has complex roots and competing international influences can be a decisive factor. Major uncertainties are associated with these dynamics and projecting future economic trends is, therefore, a daunting task.

Current Account and Foreign Exchange

Overall, the Libyan economy contracted by about 31% in 2020. The precipitous fall in its hydrocarbon output damaged its external balance and fiscal position in 2020, filtering through to weaker government spending, reduced private consumption, and lower imports. The economic collapse also had adverse effects on the non-hydrocarbon economy: water shortages were prevalent, with reports of the sabotage of water wells. Power outages persisted throughout the year; only 13 of 27 power plants were functioning. As late as mid-December 2020, three months after ports had been reopened, the government was still urging consumers to stop queueing at gasoline stations.

The collapse of oil revenues strained the ability of the monetary and fiscal authorities to defend Libya’s currency and on December 16, for the first time in five years, the board of directors of the Central Bank of Libya agreed to devalue it from  LYD 1.00 = SDR 0.5175 to LYD 1.00 = SDR 0.156, effective as of January 3, 2021, with the equivalent rate to the US dollar, LYD 4.48 = US$1.00 using US$1.44 = SDR 1.00 rate. The new rate aims to apply to all government, commercial, and personal foreign exchange transactions and largely remove the growing gap between the parallel market and official rates, rendering an FX surcharge unnecessary.

Libya Public Finance

The task of rationalizing fiscal policy appears formidable. Libya’s public finances are fundamentally unsustainable. Reflecting its almost singular reliance on oil and gas, hydrocarbon revenues had made up 85% of total government revenues from  2015 to 2017, before a tax on foreign exchange transactions was introduced as a temporary measure in 2018, grabbing a 40% share of total revenues and reducing the share of hydrocarbon revenues to a still hefty 55% share in 2019.

The heavy dependence of government finances on hydrocarbon revenues will likely persist until Libya creates a more diversified economy, a gargantuan task even for the advanced-economy oil and gas producers of the Gulf Cooperation Council that have accelerated their economic diversification efforts with ambitious Vision policies and programs in recent years. More strikingly, Libya’s expenditure structure is highly rigid even as its hydrocarbon revenues are volatile: its wage bill, which has accounted for 61% of total expenditures, makes it among the costliest and least cost-efficient public sectors in the world.  Subsidies that cover the gamut of fuel, electricity, water, sewage, and sanitation have amounted to 16% of total expenditures in 2020.

Last Updated: Mar 05, 2021


Libya: Commitments by Fiscal Year (in millions of dollars)*

The World Bank does not have any recent lending to Libya. Please view the full Lending Portfolio

*Amounts include IBRD and IDA commitments
More Photos

In Depth

Additional Resources

Country Office Contacts

Ebrahim Al-Harazi