Central Bank of Libya Will Remain Under “Immense Pressure” Without a Political Solution, Governor Tells Global Finance

Global Finance magazine published an interview on Saturday with Central Bank of Libya Governor Naji Issa, highlighting several key points.

For Libya, Governor Naji Issa may see a positive impact from rising oil prices, given that oil and gas account for more than 90% of government revenues and exports. However, higher oil prices should not be interpreted as a solution to Libya’s underlying economic problems.

The magazine noted that temporary increases in oil revenues could easily translate into higher recurrent spending rather than productive investment. This would reinforce the economy’s existing dependence on oil and leave it vulnerable once prices return to normal levels.

It also highlighted significant downside risks. Rising global energy, shipping, and insurance costs could increase the cost of imports, transportation, and essential goods, adding to inflationary pressures and affecting household purchasing power. Furthermore, a prolonged conflict could weaken global economic activity and oil demand, while continued uncertainty could increase volatility in oil prices and international trade.

Global Finance: From a banker’s perspective, what are the main challenges facing Libya?

Issa: The Libyan economy faces serious structural challenges, particularly its heavy dependence on hydrocarbons, excessive public spending, pressure on the exchange rate, the continued expansion of the public sector, and the private sector’s limited contribution to economic activity and gross domestic product (GDP).

Libya remains highly vulnerable to oil price shocks and production disruptions. This means that public finances and the broader economy remain significantly exposed to fluctuations in global oil prices and sudden interruptions in hydrocarbon production.

The structure of the public budget itself is also a source of concern, with approximately 85% of total public spending directed toward consumption. This includes around 45% allocated to public-sector salaries and 25% to subsidies.

Meanwhile, public-sector employment has grown significantly, reaching approximately 2.3 million employees out of a population of 7.5 million.

Our objective, therefore, is to restore fiscal discipline and gradually redirect public spending toward productive investment while reducing the economy’s dependence on oil revenues.

This requires strengthening the private sector and increasing its contribution to GDP by improving the business and investment environment, encouraging entrepreneurship, and promoting investment in alternative sectors such as trade, logistics, agriculture, manufacturing, and services.

Global Finance: Libya’s first unified budget in 13 years, approved in April, was a major achievement. How is implementation progressing?

Issa: The adoption of Libya’s first unified budget since 2013 represents a historic milestone in restoring fiscal discipline, overcoming fiscal fragmentation, and establishing a robust common framework for public spending that strengthens transparency and accountability nationwide.

Although implementation faces clear challenges, including pressure from both governments to increase spending, the primary objective is to ensure that public expenditure fully complies with the agreed framework and is supported by sustainable revenues.

Issa added that the Central Economic Council continues to strengthen spending controls, improve cash management, and direct public resources toward essential services, strategic development, and key economic priorities.

He acknowledged that the framework’s success ultimately depends on sustained institutional cooperation and disciplined implementation.

Global Finance: After nine years of institutional division between Tripoli and Benghazi, how is the Central Bank being reunified, and what are the main challenges?

Issa: The reunification of the Central Bank represents a significant institutional achievement in the country’s journey toward economic and financial stability. It has restored unified governance, integrated operational data, coordinated procedures, and helped rebuild professional confidence in the banking sector.

Building on this foundation, the unified Central Bank has led a comprehensive modernization of the financial system.

Among the most notable developments are advanced instant electronic payment systems, including real-time disbursement of public-sector salaries, alongside improved foreign currency management and the resumption of secure foreign banknote imports to ensure the availability and integrity of cash within the formal economy.

However, in the absence of a political settlement that establishes a single government for the entire country, the unified Central Bank will remain under immense pressure, according to the magazine.