Professor of Finance and founder of the Libyan Stock Market, Suleiman Al-Shahoumi, wrote in a post:
The Central Bank of Libya supervised the signing of an agreement between representatives of the High Council of State and the House of Representatives, in what appears on the surface to be a serious attempt to contain one of the most dangerous aspects of Libya’s division: public spending and the distribution of state resources.
The move reportedly followed dialogue between the key actors, with foreign sponsorship playing a visible role — particularly by U.S. envoy Pauls — in bringing viewpoints closer together and pushing the parties toward a temporary understanding that could ease tensions over public finances.
According to circulating information, the process resulted in an agreement concerning development spending, a category that has long represented one of the main areas of conflict between rival institutions. Reports suggest that around 40 billion dinars may be allocated for this purpose, with spending distributed across various regions of the country.
On the surface, the agreement may appear to be a positive step carrying a degree of optimism. Even the parallel foreign exchange market appeared to interpret it as a sign of goodwill, reflected in a relative decline in the dollar exchange rate, as if market actors were willing to give the move an initial chance.
However, a deeper reading of the development reveals that the matter goes far beyond simply agreeing on a figure or a spending category. The real question is not whether the parties agreed to share spending, but rather: what is the true nature of this agreement?
Are we looking at a temporary political settlement among centers of power dividing public resources under the banner of “development”? Or are we witnessing the beginning of a genuine transition toward building a unified national budget based on clear rules for estimating revenues, setting priorities, controlling expenditures, and placing all parties under legal and institutional oversight?
This is the core issue, because the difference between a power-sharing arrangement and a national budget is not merely linguistic or procedural — it represents two entirely different approaches to governing the state.
A power-sharing agreement is based on political appeasement and quota distribution among rival actors, with the primary goal often being conflict management rather than long-term stability. A public budget, on the other hand, is a sovereign and legal instrument for managing revenues and expenditures according to a unified national vision, grounded in realistic estimates and governed by transparency, discipline, and accountability.
If reports are accurate that total planned spending could reach around 180 billion dinars to cover all categories of public expenditure, then Libya would be facing an extremely large figure that raises several questions.
At this scale, within Libya’s current economic structure, such spending cannot simply be viewed as ordinary fiscal expansion. It may instead signal an excessive spending pattern that is not necessarily based on conservative revenue estimates or a prudent strategy for managing future risks.
These concerns become even more serious when considering the rentier nature of the Libyan economy, which depends heavily on oil revenues. Oil, despite generating rapid financial inflows, remains an unstable source of income subject to international market fluctuations, geopolitical developments, and domestic disruptions that could halt production or exports at any moment.
As a result, building a high level of spending on the basis of a temporary surge in oil prices — or exceptional revenues linked to international crises such as tensions around the Strait of Hormuz — could represent a highly risky fiscal approach unless accompanied by clear precautionary measures, sufficient reserve-building, and a realistic strategy for dealing with future price declines.
In this context, legitimate questions arise:
Has the current rise in oil revenues been used to create a financial safety margin for the state?
Has part of these resources been allocated to strengthening foreign currency reserves?
Has a plan been established to reduce accumulated public debt?
Or has the focus primarily shifted toward opening the door for further expansion in both current and development spending without sufficient guarantees for sustainability?
The greatest danger here lies not only in the size of the spending itself, but also in the environment in which this money would be spent.
Libya continues to suffer from deep institutional fragility, divided authority, weak oversight and accountability systems, and chronic imbalances in the relationship between financial and executive power.
