Ashnibish Writes: “The Libyan Economy – Reality and Challenges”

In a recent article, Anas Ashnibish examined the state of the Libyan economy, describing it as a rentier economy that heavily relies on a single, finite resource—oil. This resource serves as the primary source of funding for the public budget and all economic sectors. Libya’s economy is among the least diversified in the region, particularly compared to neighboring countries and other oil-producing nations. Oil accounts for more than 65% of the gross domestic product (GDP) at current prices, while the economy is highly exposed to external markets, both in imports and exports.

Oil export revenues constitute about 97% of Libya’s total exports. At the same time, the country imports no less than 85% of its local market needs. The public sector is the primary source of employment, with nearly 3 million government employees—a staggering ratio compared to the total population, making it the highest globally. Moreover, the state plays a near-total role in providing infrastructure-related services, subsidies, and wages.

The inefficient allocation of economic resources, excessive consumption rates, and inequitable wealth distribution have led to the emergence of “disguised unemployment.” While the country has a high percentage of youth, it suffers from a limited skilled workforce due to the mismatch between educational outputs and labor market needs.

These characteristics of the Libyan economy have had negative repercussions on achieving local and sectoral development, particularly amid political and security instability. This instability further hampers efforts to support and advance the economy. Progress can only be achieved through economic policies grounded in transparency, anti-corruption efforts, and collaborative teamwork.

The unique features of the national economy have, in recent years, exacerbated the challenges it faces, especially in managing economic, financial, monetary, trade, and investment policies. The key challenges include:

1. Delayed return to stability.
2. Political and institutional division at all levels.
3. Overreliance on oil revenues to fund economic activities.
4. Severe inefficiencies in public financial management.
5. Dominance of current expenditures over investment spending.
6. High government subsidy costs.
7. Lack of comprehensive and reliable data.