A committee of economic experts formed by the Libyan Presidential Council has issued a comprehensive report assessing Libya’s current economic and financial situation, highlighting deep structural imbalances and proposing urgent reform measures.
Current Economic Challenges
The report reveals that Libya is facing a severe economic crisis that has negatively impacted a large segment of the population, with over 40% living below the poverty line. Key issues include:
- Declining sovereign revenues, particularly from oil, despite stable production and prices—due to withheld revenues and exports outside legal frameworks.
- Weak non-oil revenues (less than 5% of total), including sharp declines in telecommunications income, customs duties, and tax collection.
- No revenues from domestic fuel sales were transferred to the public treasury throughout 2025.
- Institutional fragmentation, weak governance, lack of oversight, and widespread corruption.
Rising Spending and Debt
The report highlights a significant expansion in public spending, especially on wages, subsidies, and operational expenses. With reduced revenues, governments resorted to borrowing from the Central Bank of Libya, leading to:
- Public debt exceeding 300 billion LYD (over 180% of GDP by 2025).
- Money supply rising to nearly 200 billion LYD without corresponding real economic growth.
- High inflation, pressure on the exchange rate, and declining purchasing power.
Risks if the Situation Persists
If current trends continue, Libya may face:
- Further inflation and erosion of citizens’ purchasing power.
- Continued depreciation of the Libyan dinar (which has lost over 80% of its official value in five years).
- Growing fiscal deficits, poverty, and unemployment.
- Increased social and security instability.
- Greater vulnerability to oil price fluctuations.
Key Short-Term Recommendations
The committee proposed urgent measures to restore stability, including:
- Enforcing financial laws to ensure all sovereign revenues are transferred to state accounts and obligating the National Oil Corporation to fully remit oil and gas revenues transparently and on time.
- Setting a public spending cap at 80% of 2025 expenditure, pending agreement on a unified budget.
- Reducing unnecessary operational expenses and reorganizing development priorities.
- Stopping deficit financing and setting a clear ceiling for public debt.
- Reforming fuel subsidies and combating fuel smuggling.
- Improving tax, customs, and revenue collection systems while addressing corruption.
- Avoiding reliance on exchange rate devaluation or taxes on foreign currency sales to fund deficits.
- Regulating imports, prioritizing essential goods, and strengthening customs oversight.
- Limiting foreign currency use within available resources and avoiding reserve depletion except when necessary.
Conclusion
The committee stressed that implementing these urgent reforms, alongside strong political will, effective governance, and anti-corruption measures, is essential for achieving economic stability and enabling long-term structural reforms in Libya.
