Economics professor Ayoub Al-Farsi wrote an article in which he stated:
Libya 2026… An Oil Trap or an Opportunity for Reform?!
The beginning of the old–new wager is tied to the global energy market, which has shaped Libya’s economic landscape for decades. With expectations of an increase in oil supply in 2026 due to higher production from countries outside OPEC+, a downward trend in prices this year is more likely.
The biggest challenge lies with the National Oil Corporation, which suffers from an inability to increase production and complains of not being supported with an operational budget to expand output.
Low prices will absorb and conceal any increase in production, but boosting production remains very important in the short term, as prices will inevitably rise again in the near future.
No positive impact on higher prices is expected from developments in Venezuela, since Venezuelan oil has effectively come under indirect U.S. control, and Trump’s policy has always been to lower oil prices.
Repercussions for the Libyan economy:
First, it must be noted that resource management in Libya is unwise, as periods of high prices are exploited only for increased consumer spending. Thus, in 2026, poor resource management will coincide with declining revenues.
Expected outcomes:
A practical inability to reach the massive spending levels seen in the past two years, given the same conditions regarding prices, production volumes, and the exchange rate level.
A reduced margin for maneuvering with foreign reserves, which were drawn down in 2025. The Central Bank must send clear messages against financing the budget through deficits or by adjusting the exchange rate.
Broad lines for crisis management:
Since economic policies are interconnected and integrated, the starting point must be fiscal policy. It has become mandatory—not optional—for it to be based on a unified budget and to have the following characteristics:
It must be built on expected revenue levels. Any spending beyond expected revenues should be covered by the government through its currently stalled tools such as taxes, telecommunications, customs, and others, which together contribute virtually nothing to total public revenues—an illogical situation given their potential.
Prioritizing development and productive spending over consumer spending, in preparation for the future and to reduce excessive dependence on the oil sector.
Reducing expenditures of government bodies that consume a portion of the state budget without economic impact—especially embassy expenses and ministries’ operational budgets—within an integrated package to control public spending.
Complementary economic policies:
The Ministry of Economy should determine the quantities of basic and essential goods needed by the market and track shipments imported through letters of credit, to help the Central Bank reduce the use of foreign currency for this purpose. Determining quantities and categories falls within the Ministry’s mandate.
Regulating prices and pricing according to the official exchange rate rather than the parallel market, after activating the traders’ system for requesting letters of credit.
Defining goods eligible for letters of credit and excluding non-essential and luxury items under these exceptional circumstances.
Launching a national program to support small and medium-sized enterprises aimed at transitioning state employees—especially in labor-dense sectors that add no value to the economy but burden the public budget and provide low incomes—to the private sector. Supporting the private sector offers citizens opportunities to improve living standards and establish their own economic entities.
Regulating the fuel sector by determining actual needs and introducing a new mechanism to ensure quantities reach rightful beneficiaries, until suitable conditions are created to address this file after achieving satisfactory levels of governance and transparency.
Combating the scourge of corruption, which is the root cause of all the problems afflicting the Libyan economy.
The lesson learned from oil price fluctuations is that Libya is only as wealthy as its ability to transform this rent into a real, productive, and diversified economy.
