International Monetary Fund (IMF) Executive Board Concludes the 2025 Article IV Consultation with Libya

Zawya

3 days ago

The Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with Libya.[1] The Executive Board's decision was taken on a lapse-of-time basis.
Real GDP growth is estimated to have declined to around 2 percent in 2024 from 10 percent in 2023, driven by a contraction in the hydrocarbon sector. At the same time, non-hydrocarbon growth remained robust on the back of sustained government spending. Both the current and the fiscal accounts have swung from a surplus in 2023 to a deficit in 2024. Reported inflation remained low.
The outlook continues to be dominated by developments in the oil sector. Real GDP growth is projected to rebound in 2025, primarily driven by an expansion of oil production, before moderating to about 2 percent over the medium term. Non-hydrocarbon growth is set to remain between 5 and 6 percent in the medium term, supported by sustained government spending. The current account is slated to post a small surplus in 2025 (0.7 percent of GDP) before turning into a small deficit over the medium term, as oil prices remain subdued. The fiscal balance is projected to remain in deficit—albeit at a much lower level than in 2024—under the weight of continued large government spending.
Risks are tilted to the downside. Domestic risks stem from political instability, potentially evolving into active conflict, disrupting oil production and exports, and preventing progress on much-needed economic reforms. The economy is exposed to global downside risks through its heavy dependence on oil exports and a large import bill.
Executive Board Assessment[2]
Economic activity and fiscal and external accounts are poised to remain heavily dependent on developments in the oil sector and subject to downside risks. Following a rebound in oil production, economic growth is expected to be in double digits in 2025, before moderating over the medium term. Despite the expected increase in oil exports, the current account and fiscal balances are set to remain in deficit over most of the forecast horizon, weighed down by the projected softening of oil prices and large fiscal spending. The outlook is subject to downside risks, including the potential intensification of domestic political tensions, which could disrupt oil production and exports, and adverse global economic and geopolitical developments, which would put additional downward pressure on oil prices. To mitigate these risks, accelerating reforms aimed at restraining fiscal spending and diversifying the economy away from oil will be crucial.
Controlling expenditure will be key to ensure sustainability and to achieve intergenerational equity. The authorities should remain steadfast in their efforts to agree on a unified budget that outlines priority spending and enhances the transparency and credibility of government fiscal operations. Until such an agreement is reached, pressures to increase spending on salaries and subsidies should be resisted. Over the medium term, a sizable adjustment will be required to set the fiscal position on a sustainable trajectory and preserve intergenerational equity. The adjustment should be carefully designed to rationalize current spending, particularly wages and energy subsidies, and mobilize non-oil revenues, while maintaining capital expenditures at levels that support economic diversification.
A well-designed monetary and exchange rate policy framework will be essential to help manage economic cycles and mitigate the depreciation pressures. Introducing a well-defined policy rate will enhance the CBL's capacity in smoothing the economic cycle and alleviating pressures on the dinar and provide a benchmark for the pricing of credit by both conventional and Islamic banks. Phasing out the foreign exchange tax alongside other exchange restrictions in line with Libya's Article VIII obligations will reduce distortions, lower economic agents' need to resort to the parallel market and help unify the exchange rate.
Reforms are needed to reinforce the banking sector's contribution to economic activity. Impediments to a more active role by banks in the economy remain pervasive. Introducing well-designed savings plans will help to reduce cash hoarding, expand banks' deposit base, establish bank-customer relationships, and support the provision of credit to the private sector. Enhancing transparency and accountability within the banking sector and promoting financial literacy among the public would foster confidence in banks and increase their footprint in Libya's economy. Strengthening the AML/CFT framework, including by aligning it with international standards, will be paramount to support the stability of correspondent banking relationships and to ensure that Libyan banks' operations remain uninterrupted.
Structural and governance reforms would foster the emergence of a diversified, sustainable, and private sector-led economy. Forging a comprehensive reform program aimed at reducing dependence on oil revenues should be at the top of the authorities' agenda. Key elements of the reform program should promote a more active engagement of the private sector in economic activity, including by enhancing the business environment and access to finance and introducing labor market measures that encourage private sector employment. Taking decisive actions to tackle corruption, strengthen governance, and enhance the rule of law will support economic diversification further.
There is a need to enhance data provision and statistical capacity. Data gaps continue to significantly hamper staff's ability to conduct analysis and provide policy advice. There is a need for the authorities to implement the technical assistance recommendations in the areas of national accounts and external sector statistics, and monetary and financial statistics, and improve data collection and reporting.
(Main Export: Crude Oil)
Est.
Proj.
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
(Annual percentage change, unless otherwise indicated)
National income and prices
Real GDP (at market price)
28.3
-8.3
10.2
1.9
16.1
4.4
1.6
1.7
1.9
2.2
Nonhydrocarbon
5.9
7.9
-0.6
14.3
2.9
5.9
4.2
4.4
4.8
5.3
Hydrocarbon
45.0
-17.0
17.8
-5.5
25.6
3.6
0.0
0.0
0.0
0.0
Nominal GDP in billions of Libyan dinars 1/
159.0
208.2
211.9
234.3
251.2
254.2
265.5
277.9
292.0
306.6
Nominal GDP in billions of U.S. dollars 1/
35.2
43.3
44.0
48.4
47.2
47.7
49.8
52.2
54.8
57.6
Per capita GDP in thousands of U.S. dollars
5.2
6.4
6.4
7.0
6.8
6.8
7.0
7.3
7.5
7.8
GDP deflator
90.4
42.7
-7.6
3.6
-3.3
-3.1
2.8
2.9
3.1
2.8
CPI inflation
Period average
2.9
4.5
2.4
2.1
2.3
2.3
2.3
2.3
2.3
2.3
End of period
3.7
4.1
1.8
2.3
2.3
2.3
2.3
2.3
2.3
2.3
(In percent of GDP)
Central government finances
Revenues
79.5
85.8
73.6
69.8
67.9
61.1
58.5
56.6
54.5
52.4
Of which: Hydrocarbon
78.1
83.9
71.6
55.4
62.1
59.2
56.7
54.7
52.6
50.4
Expenditure and net lending
64.7
62.2
65.4
94.8
73.2
64.6
61.8
59.5
57.1
54.8
Of which: Capital expenditures
10.9
8.4
8.7
34.6
20.1
12.8
12.1
11.4
11.0
10.9
Overall balance
14.8
23.6
8.2
-25.1
-5.3
-3.5
-3.3
-2.9
-2.7
-2.5
Overall balance (in billions of U.S. dollars)
5.2
10.2
3.6
-12.1
-2.5
-1.7
-1.6
-1.5
-1.5
-1.4
Nonhydrocarbon balance
-63.3
-60.3
-63.4
-80.5
-67.5
-62.7
-60.0
-57.6
-55.2
-52.9
(Annual percentage change unless otherwise indicated)
Money and credit
Base Money
2.8
-16.9
47.9
6.6
36.8
9.0
9.2
10.0
10.2
16.7
Currency in circulation
-20.0
-1.4
37.6
13.3
10.5
2.2
1.5
5.0
5.0
5.0
Money and quasi-money
-20.3
12.0
28.3
12.2
4.0
4.5
4.5
5.0
5.0
5.0
Net credit to the government (Libyan Dinar, billion)
-94.1
-114.9
-110.9
-128.8
-130.4
-121.4
-112.7
-104.6
-96.8
-89.3
Credit to the economy (% of GDP)
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
(In billions of U.S. dollars, unless otherwise indicated)
Balance of payments
Exports
25.9
32.1
30.9
28.4
32.0
31.3
31.6
32.0
32.5
32.9
Of which: Hydrocarbon
24.5
30.0
28.8
26.3
29.9
29.1
29.2
29.7
30.3
29.9
Imports
17.0
17.2
17.7
21.6
21.9
20.5
20.6
20.8
21.0
21.2
Current account balance
5.7
10.0
8.0
-2.0
0.3
-0.3
-0.2
-0.2
-0.1
-0.1
(As percent of GDP)
16.1
23.2
18.3
-4.2
0.7
-0.5
-0.4
-0.3
-0.3
-0.1
Capital Account (including E&O)
-7.0
-5.3
-3.8
6.5
-2.8
-1.4
-1.4
-1.4
-1.3
-1.3
Overall balance 2/
1.1
4.7
4.3
4.5
-2.5
-1.7
-1.6
-1.5
-1.5
-1.4
Reserves
Gross official reserves
69.4
74.1
78.4
82.9
81.1
79.4
77.8
76.3
74.8
73.4
In months of next year's imports
32.2
32.8
34.2
29.6
31.0
32.3
31.5
30.5
29.6
28.8
Gross official reserves in percentage of Broad Money
317.0
318.2
261.3
250.3
262.9
246.4
230.9
215.6
201.4
188.2
Total foreign assets
79.7
84.2
88.5
93.6
91.6
89.7
87.9
86.2
84.5
82.9
Exchange rate
Official exchange rate (LD/US$, period average)
4.5
4.8
4.8
4.8
…
…
…
…
…
…
Parallel market exchange rate (LD/US$, period average)
5.1
5.1
5.2
6.9
…
…
…
…
…
…
Parallel market exchange rate (LD/US$, end of period)
5.0
5.2
6.1
6.4
…
…
…
…
…
…
Crude oil production (millions of barrels per day - mbd)
1.2
1.0
1.2
1.1
1.4
1.5
1.5
1.5
1.5
1.5
Of which: Exports
1.0
0.8
1.0
0.9
1.1
1.2
1.2
1.2
1.2
1.2
Crude oil price (US$/bbl) 3/
64.4
89.6
75.0
73.6
66.9
62.4
62.7
63.6
64.3
64.9
Sources: Libyan authorities; and IMF staff estimates and projections.
1/ Nominal GDP data are at market prices.
2/ Includes revaluation of gold holdings of U$10.5 billion in 2024.
3/ The crude oil price was adjusted for Libya up to 2024.
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.
Distributed by APO Group on behalf of International Monetary Fund (IMF).