The Central Bank of Libya has announced that last year’s foreign currency receipts totalled US$22.9 billion while expenditures was US$24.5 billion with the bank using its own reserves to cover the deficit. Around 97% of revenues — LD103.4 billion (US$22.5 billion) — came from oil exports.
Because of the House of Representatives’ continuing refusal to approve the Government of National Unity’s (GNU) 2021 budget — partially because it was considered too large for an interim government but mainly as a deliberate way of weakening the Tripoli-based administration — the central bank allocated a monthly budget to the GNU based on the previous year’s expenditure. It was broken down as follows:
- State-sector salaries (39%)
- State subsidies (24%)
- Development projects (20%)
- Operating expenses (9%)
- Emergencies (8%)
Despite this the GNU used almost the entire sum allocated to emergency spending on development projects thereby increasing the latter to 27%. This was a sharp increase when compared with the 4% allocated for development expenditures during the previous four years. It should be noted, however, that there was almost no development during this period which saw: the ferocious battles to remove Islamic State from Sirte; Khalifa Haftar’s campaign to control Benghazi, Tobruk and other eastern towns; and his subsequent hugely damaging siege of Tripoli. Prime Minister Abdulhamid Dbeibah’s GNU has therefore had to begin to finance a programme of essential repairs and its ‘Reviving Life’ development programme, announced in August 2021, is intended to build and restore roads, hospitals, schools, and housing.
Prioritising development programmes would usually be a laudable goal but for an interim government — which is only in office to ensure that the right conditions are in place for elections and even this proved impossible — Dbeibah’s high-level of spending is viewed by many as designed to enhance his personal popularity. Given that it now appears that the GNU will remain in place — probably for at least six months until elections can be held, and potentially longer if the stakeholders cannot agree on a new timeline — and given that Dbeibah seems determined to become Libya’s elected president, this type of spending is likely to continue this year.
Libya’s overall financial situation is unlikely to change dramatically in 2022 unless there is a resumption in widespread conflict. This is certainly possible given the ongoing presence of the majority of foreign troops and mercenaries and the escalating tensions following the postponement of the 24 December elections and the current absence of a national reconciliation process. Foreign investment is unlikely to increase until there is political stability and peace and, unless the on-going maintenance problems are resolved, this will lead to falling oil production and revenues. If, however, the international community can persuade the country’s main stakeholders to organise an agreed political transition process, the country’s finances could stabilise and eventually improve.This excerpt is taken from Libya Politics & Security, our weekly intelligence report on Libya. Click here to receive a free sample copy.