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Overview

The year 2021 marked a turning point in Libya’s decade-long conflict. A ceasefire agreed in October 2020 has held and a unified interim government – the Government of National Unity (GNU) – was formed in March. The GNU is expected to run until the parliamentary and presidential elections, which are scheduled for December 24, 2021.

Positive Economic Developments, yet institutional challenges persist. Oil production has recovered to 2019 levels (1.2 million barrels per day) and an exchange rate devaluation in January 2021 largely removed the wide and growing wedge between black market and official rates. The authorities also initiated efforts to reunify competing public institutions in the east and west of the country, but significant challenges remain. A financial review of the Central Bank in Tripoli and the Bayda branch has been finalized; the next steps require political agreement on unification under a single decision-making authority, in addition to unifying balance sheets, policy making, regulatory and supervision processes, and operations. Efforts to approve a unified 2021 budget, the first since 2014, have been protracted, with multiple drafts submitted by the GNU and rejected by the House of Representatives since March 2021.

Following a massive economic contraction in 2020, Libya’s hydrocarbon sector, and in turn its economy overall, are witnessing a significant rebound. Overall, the Libyan economy contracted by about 31% in 2020. Following the lifting of the oil blockade in late 2020 and the resilience of global oil prices, hydrocarbon export receipts and in turn the trade balance and current account balance are on an upward swing. While the country’s protracted liquidity crisis persists, particularly in eastern and southern parts of the country, there has been some improvement in 2021. With the abolishment of the foreign exchange tax in January 2021, the gap between the official and parallel market exchange rates have narrowed significantly.  While the devaluation has improved macro-economic stability the adverse impact on purchasing power has been felt throughout the population, particularly affecting the poor.

Should the political process progress positively and the security situation remain stable, Libya will continue its path of economic recovery. If the current rapprochement remains on track, with presidential and parliamentary elections successfully moving forward in a peaceful manner, and oil production persisting, Libya is forecasted to record a GDP growth rate of over 70 percent in 2021. In turn, the trade and current account balances will record a surplus in 2021, especially if global oil prices remain in the $70 per barrel range. The fiscal balance could record a surplus given the strong rebound in oil production and exports and following the devaluation of the currency which has reduced the cost of financing public sector salaries and goods and services using dollar-denominated oil revenues. This, however, will depend on the size of the 2021 budget which is yet to be approved. Despite major maintenance problems still pending, oil production is expected to continue rising in 2022, supporting further economic growth.

The agenda for social policy and institutional reform is full and needs urgent attention. Besides peace and stability, the country needs urgent infrastructure investments and an improvement in public service delivery. Libyans are also increasingly affected by the COVID-19 pandemic. Technical progress on integrating payrolls of the two former administrations and in reunification of the central bank has continued. Overall, any potential progress in these areas would be curtailed should the reunification process stall.

Last Updated: Oct 06, 2021

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