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Overview

The delay of national elections originally scheduled for December 2021, with no agreement on the new dates nor on the legal and constitutional basis for these proposed elections, has brought a return to political division in Libya. The confirmation of a new government cabinet by the eastern-based House of Representatives in February 2022 has returned Libya to a state of institutional division with two parallel government administrations in the East and West. Competition between rival governments led to the blockade and shutdowns of oil facilities and armed clashes in the capital. Some demonstrations across the country saw citizens protest the deteriorating political and economic conditions.

Political and security tensions could hinder the economic rebound registered in 2021. Oil production in the second quarter of 2022 averaged 0.88 million barrels per day, 33 percent less than during the first quarter. Soaring international oil prices improved the fiscal surplus during the first eight months of 2022 to 13 percent of 2021 GDP, excluding spending of the National Oil Corporation, compared to 7 percent during the same period in 2021. The trade balance surplus grew by 72 percent in nominal USD terms during the first five months of 2022 compared to the same period in 2021. Foregone oil revenues due to the blockade of oil facilities amounted to around USD 4 billion. At the beginning of the third quarter of 2022, oil production resumed at 1 million barrels per day.

The war in Ukraine has fueled inflationary pressures, further deteriorating household welfare. Prices of essential goods rose during 2021 and accelerated in the first half of 2022. The cost of the Minimum Expenditure Basket and its food portion rose respectively by 37 and 41 percent year-on-year in April 2022, or 13 and 15 percent compared to their pre-war level (February 2022). Inflationary pressures have been higher in the Western part. Food prices remained high in June 2022 despite the authorities’ measures to contain price increases. According to REACH’s Multi-Sectoral Needs Assessment, 27 percent of Libyans were earning less than needed to afford the Minimum Expenditure Basket, with a higher incidence in the southern part of the country.

Political instability in Libya and the ongoing war in Ukraine will likely slow down Libya’s economic recovery. If the country could sustain current levels of oil production and exports, it will benefit from soaring global oil prices, translating into higher fiscal revenues and more significant inflows of hard currency. This will positively impact its growth and its fiscal and external balances. Transparent and accountable management of Libya’s oil revenues and public spending will be critical to ensure that the country’s wealth benefits the population. However, positive economic performances depend on the improvement of political and security conditions. Other shocks to the global economy, or shocks to global commodity prices, would adversely affect Libya’s economic activity and household welfare.

Last Updated: Oct 20, 2022

LENDING

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
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Ebrahim Al-Harazi
+1 (202) 855 1565