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Exclusive: Central Bank Governor to Parliament’s Budget Committee Rapporteur: We Cannot Comment on the 2025 Budget Draft… and Here’s Why

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Our source has exclusively obtained a letter from the Governor of the Central Bank of Libya, Naji Issa, addressed to the Rapporteur of the Planning and General Budget Committee in the House of Representatives. In it, the Governor asserted that the Central Bank is unable to provide comments on the 2025 budget draft, stressing the need to reconsider the proposal and consult with the Central Bank and other relevant state institutions before its approval.

The Governor explained that established practices — in accordance with laws such as the Banking Law (Article 5, paragraphs 3, 4, 5, and 6) — require consultation with the Central Bank during the preparation of the general budget. Sending the draft budget law in its current form and requesting feedback within three days does not fulfill the goals or principles of meaningful consultation with the Central Bank, nor does it result in a budget that the Central Bank can implement.

He further noted that effective and practical consultation must address the fundamental elements of the general budget — most importantly, the need to adopt a unified budget as a prerequisite for controlling and consolidating public expenditures. Advance consultation is also necessary, he added, given that the country is already in the second half of the fiscal year. This requires taking into account the revenues collected and expenditures made during the first half of the year, as well as the actual revenue and spending estimates — a crucial aspect that was neglected in the submitted draft.

The Governor also revealed that he has begun directly addressing the Speaker of the House of Representatives to clarify the reasons behind the Central Bank’s inability to comment on the proposed budget.

Mraja’a Ghaith Comments on Al-Safi’s Proposal Regarding Budget Ceilings and Revenue Tagging

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Former member of the Board of Directors of the Central Bank of Libya, Mraja’a Ghaith, stated that the economic expert Mohammed Al-Safi had proposed setting a predetermined ceiling for the budget allocated to government entities, with the requirement that these entities operate within that ceiling. He also suggested linking some budget chapters to non-oil revenues — essentially allocating specific revenues for spending on specific budget items. This proposal sparked mixed reactions, with some in favor and others raising questions about its feasibility.

Ghaith explained that to understand what Al-Safi proposed, one must first understand how budget estimates are prepared in Libya. He noted that preparation begins from the bottom up — from the treasury-funded entities (except for central items like subsidies) — with estimates sent to the Ministry of Finance, which discusses them with the entities to arrive at a suitable figure. Generally, all entities inflate their estimates to minimize the impact of potential reductions. This practice is ongoing, and sometimes estimates are not built on sound foundations. He specifically pointed to Chapter Two – Operational Expenses, where overestimations are common. In contrast, Chapter One – Salaries is easier to control objectively, given the availability of employee data, though some exaggeration still occurs in areas like food allowances.

Ghaith added that Al-Safi proposed that the Ministry of Finance set a spending ceiling, especially for Chapter Two, and obligate all entities to allocate that ceiling across its items. This ceiling would be based on actual spending data from the past three to five years, as operational expenses are recurring and change in line with the number of employees or price levels.

He continued, saying that while some argue that the budget already acts as a ceiling, the current system relies on the proposals from government entities, which are then approved after discussions. However, the origin of these proposals still lies with the entities themselves. What the proposal aims to do is shift the control to the state, represented by the Ministry of Finance, allowing it to set expenditure limits directly. This doesn’t mean there won’t be exceptions or necessary adjustments.

Regarding Chapter Three, which Ghaith prefers to call the “Development Budget,” currently governed by the Planning Law, the ceiling is determined in aggregate — the state specifies the total amount to be spent on projects in a given year, and then priorities are set for what can be implemented with that amount. He pointed out a flaw: the full cost of a project is often included in the next year’s budget, rather than just the amount expected to be spent that year. Since some projects span multiple years, this inflates the budget with figures that are impossible to spend within a year.

On revenue tagging — the idea of allocating specific revenues to certain budget chapters and not exceeding those revenues in spending — Ghaith said this acts as both a control mechanism and an incentive to collect those revenues. For example, setting Chapter Two’s spending limit based solely on non-oil revenues (such as taxes, fees, state shares in public companies, and local fuel sales) would motivate efforts to collect them. For tagging to work properly, most public services must be transferred to local governments instead of remaining under central ministries. This would drive local authorities to collect more revenues if they wish to maintain spending.

He stated that this proposal could be considered a step toward reform — public financial reform being the first of many needed steps. He clarified that while it’s not the ultimate solution, improving public expenditure management and boosting state revenue collection are crucial milestones in any broader economic reform process. Hence, efforts in monetary, trade, and fiscal policy must work together toward comprehensive reform. He warned against focusing solely on the exchange rate, which often overshadows other areas of reform, emphasizing that adjusting the exchange rate alone cannot substitute for a full restructuring of fiscal policy (spending, revenues, public debt).

Ghaith praised the existence of public finance reform documentation from past years, including three-year medium-term budgets, implementing a single treasury account, reforming regulations and tax systems, among others. He said that capping the budget helps control available resources and reduces corruption and public fund waste, as there would be no surplus due to misestimations. He acknowledged that while it won’t eliminate corruption, it could certainly reduce it.

He concluded by saying:
“Everything proposed by Mr. Mohammed Al-Safi, as well as what we’ve discussed here, ultimately depends on the political will to implement financial reform and a genuine desire to combat corruption and misuse of public funds — not on using public money to gain popularity or short-term approval at the expense of sound economic policies.”

Al-Barghouthi Writes: The Proposal for Budget Capping and Labeling – A Serious Step Toward Fiscal Discipline That Restores the State’s Authority

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Written by Professor of Political Economy Mohammed Belqasem Al-Barghouti: The Proposal for Budget Capping and Labeling – A Serious Step Toward Fiscal Discipline That Restores the State’s Authority

Amid Libya’s complex economic landscape—where resources are drained and traditional tools fail to bring financial stability—Professor Mohammed Al-Safi’s proposal for “budget capping and labeling” stands out as a serious, pragmatic, and forward-thinking initiative. It deserves careful discussion and analysis and opens the door to constructive debate on reforming public financial management.

Budget Capping: Spending Control, Not Development Curtailment
Al-Safi’s proposal is not a call for blind austerity but for conscious spending control. It is based on the principle of setting a cap on the budget to prevent financial slippage and to instill discipline as a cornerstone of good governance.

Capping here does not mean restricting development, but rather creating a realistic framework that shifts priorities from consumption-based spending to productive projects—from financial chaos to well-planned strategies governed by clear metrics and constraints.

Labeling: A Strategic Separation Between Oil Revenues and Current Spending
One of the noteworthy aspects of Al-Safi’s proposal is that it goes beyond merely reducing expenditures. It introduces the concept of labeling—a strategic move to separate oil revenues from day-to-day public spending.

This idea aligns with the recommendations of major international institutions and aims to protect oil revenues from depletion, redirecting them toward sovereign savings or long-term investments. It’s a call to end the state of “financial laxity” created by reliance on a volatile rentier resource and to establish a spending base rooted in realistic domestic revenues.

A Vision in Harmony with Institutional Reform
At its core, this proposal is in step with broader calls to rebuild the Libyan state on institutional foundations. In fact, it supports and reinforces them.

Moving toward budget capping and labeling obliges the state to define its economic and social priorities. It necessitates the development of tax collection mechanisms, stimulation of the private sector, and improvement of spending efficiency.

It is a step toward internal state reform—restoring financial functionality and reducing dependency on global market fluctuations.

A Bold Initiative in an Exceptional Moment
In today’s turbulent political and economic environment, it is rare to find individuals courageous enough to propose solutions that are both radical and practical.

Al-Safi has combined rigorous analysis with actionable steps and political realism—offering timely ideas of great responsibility and significance.

This is not merely a proposal to fix the budget. It delivers a political and moral message: that public funds are not subject to the recklessness of disorder, but a trust that must be managed with the wisdom of statehood—not as spoils of power.

Final Word:
How urgently we need such initiatives—ones that redefine the relationship between state and finances, between citizen and public service.

How urgently we need these proposals to intersect with a comprehensive economic vision that rebuilds Libya as a state, not just a market.

I commend Professor Mohammed Al-Safi for this contribution and call for a calm and responsible national dialogue that treats this proposal as part of a broader reform project—not as an isolated measure. It is through minds like his that nations rise and the first steps of real transformation are drawn.

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Exclusive: Presidential Council Requests House of Representatives to Submit Draft Budget Proposal After Consultation with High Council of State

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Our source has obtained a copy of a letter from the President of the Presidential Council, Mohamed Al-Menfi, addressed to the Speaker of the House of Representatives, Aguila Saleh. In the letter, Al-Menfi requests the submission of the draft budget proposal by the executive authority.

This request is conditioned on prior consultation with the High Council of State and requires the approval of 120 parliamentary members in a properly convened session.

Al-Safi: “The Economy Can’t Withstand It—It’s Time to Cap and Earmark the Budget”

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The economic expert Mohamed Al-Safi writes: A lost decade of Libyan economic policy.

Since 2014, the Libyan economy has faced a prolonged period of contraction and instability—what I refer to here as a “lost decade” in Libya’s economic history. Libya has been severely impacted by political division, armed conflict, and unsustainable fiscal policies, which together have driven the country into a state of economic fragility. The ongoing turmoil, coupled with high inflation and reckless fiscal expansion, has increased the economy’s dependency on oil revenues.

Between 2012 and 2023, Libya’s GDP declined by over 40%, falling from $93 billion to just $50 billion. This downturn reflects the severe disruptions caused by governmental fragmentation and the periodic halts in oil production due to conflict. Inflation, which fluctuated widely, reached 35% in 2017, eroding the purchasing power of ordinary Libyans. Meanwhile, the Libyan dinar saw a significant decline, plummeting from 1.27 LYD/USD in 2012 to 6.4 LYD/USD by 2025, exacerbating the economic challenges facing the country.

All of these economic problems have cost us a full decade of economic development and institution building.

The Problem: Fiscal Schizophrenia

Libya faces an impending public finance crisis driven by the massive gap between spending and revenue. The existence of two rival governments—each with ambitious (but poorly planned) development agendas—has escalated fiscal pressures, as both authorities pursue overlapping and often conflicting spending goals. This dual and de facto governance system has led to uncoordinated fiscal expansion, further straining already limited resources.

Additionally, Libya urgently needs reconstruction after years of conflict and the devastation caused by Storm Daniel, which killed thousands and demands significant investment in infrastructure, healthcare, education, and other public services. Achieving these reconstruction goals will become increasingly difficult without sound fiscal management, especially given the country’s limited fiscal space.

Meanwhile, Libya’s foreign currency reserves are under immense pressure. Rising public debt, higher import costs, and political instability have increased demand for foreign currency, raising the risk of reserve depletion and fueling parallel market activity. The situation is worsened by a sharp drop in revenue, especially from oil, due to egregious practices such as crude-for-fuel swaps.

This disconnection between rising expenditures and falling revenues is a ticking time bomb. Without immediate fiscal reform—including improved intergovernmental coordination, planned reconstruction spending, and diversified revenue streams—Libya risks a full-blown financial crisis.

The Solution? Defuse the Financial Bomb

To address Libya’s fiscal gap caused by rising expenditures and declining revenues, I propose a two-pillar approach: introducing a budget cap to manage excessive spending and reducing oil revenue dependence by earmarking non-oil revenues for certain budget sections.

Pillar 1: Budget Capping

A budget cap should be introduced to fix annual government spending at an agreed amount for multiple years. This agreed cap should consider the country’s development needs (e.g., areas affected by Storm Daniel and ongoing development projects) and the stabilization of the foreign exchange rate. A budget ceiling would bring several benefits:

– Breathing space for the Central Bank to reset the macroeconomy: The economic “temperature” (inflation) is currently very high, and the Central Bank needs a stabilization period of at least 3 years to reduce this. A capped budget over three years will give the Bank sufficient time to use its tools to manage the bloated money supply.

– Reduce pressure on foreign reserves: By capping spending for three years, reserve pressures will ease, stabilizing the Libyan currency.

– Contain money supply: Budget constraints will reduce market liquidity, easing inflationary pressures.

– Limit debt accumulation: A budget ceiling will prevent further public debt buildup and reduce fiscal risk.

– Encourage fiscal discipline: Government agencies will be compelled to manage resources more efficiently.

Since the country’s current leadership operates with a contractor’s mindset, perhaps the concept of “budget capping” will resonate with decision-makers who are “contractors.”

Pillar 2: Earmarking Non-Oil Revenues for Specific Budget Sections

With oil revenues, there’s little incentive to expand non-oil revenue collection. However, revenue diversification is essential for sustainable fiscal management, especially given global oil price volatility and instability in the parallel exchange market.

The proposal: Allocate non-oil revenues and link them to Chapter Two (operational expenses) of the budget. This would be done by legally stipulating that Chapter Two expenditures cannot be funded by oil revenues but only by non-oil revenues. This creates an incentive to collect and register such revenues in state accounts (currently, many such revenues are collected at source and never reach the treasury). This process, known in economics as Earmarking—or “tawsīm” in Bedouin parlance—is widely used globally. Libya itself adopted it in 2010 when part of the salary budget was directly tied to non-oil revenues.

Chapter Two is deliberately chosen as it’s the least directly beneficial to citizens. Reducing it temporarily to entrench this fiscal practice (i.e., increasing attention to non-oil revenues) would not significantly affect the population.

Two ways to improve non-oil revenue streams for earmarking:

  1. Enhance collection from existing non-oil revenue sources such as telecommunications, taxes, customs, and government services.
  2. Develop new sources of non-oil revenue. One potential source is the liquidation of underperforming state-owned enterprises (SOEs). These SOEs were intended to provide additional revenue streams but ended up draining the budget due to mismanagement and lack of incentives.

Benefits of earmarking include:

– Increased government revenue capacity: Expanding non-oil revenue streams enhances financial independence.

– Reduced oil dependence: Revenue diversification will shield the budget from oil price drops, making it more resilient to global market volatility.

– Stabilized foreign currency reserves: Less dependence on oil revenues will help maintain stronger foreign reserves even during low oil price periods—positively affecting the exchange rate and inflation.

Mechanism: Enforcing the Budget Law, with Amendments

Implementation of this public finance reform proposal must comply with Libyan state law. The national budget must return to standard legal procedures, where the budget law is drafted and approved by the legislative authority and implemented by the executive.

The 2025 budget law must include specific provisions setting a budget cap (in Libyan dinars) for several years and specify which budget chapters will be funded by non-oil revenues.

1. Budget Cap

– Conducting a technical dialogue on the budget: A technical dialogue on the budget must be initiated with the participation of state institutions, represented by the two governments, the Central Bank of Libya, and representatives of the legislative council. Non-governmental actors—including civil society organizations, independent economic experts, and academic professionals—should also be included in this dialogue. Their inclusion will ensure public participation and transparency in decision-making. This dialogue should focus on establishing a realistic budget ceiling for the fiscal years 2025, 2026, and 2027 and ensuring that it aligns with current economic challenges.

– Legislating the budget ceiling in the 2025 budget law: The legislative authority must codify the budget ceiling in the 2025 budget law, clearly specifying the exact amount in Libyan dinars and explicitly stating that this ceiling is valid for three years. This will prevent the Central Bank from having to fight the same battle every year. This ceiling will ensure fiscal discipline. If passing the ceiling is delayed for several years, the law should also include a clause that allows spending up to 1/12 of the approved budget for each subsequent month in case of delays in passing future budgets. This ensures financial and monetary stability.

– Linking the budget to the political process: A clause in the budget law should state that the 2025 budget will remain valid until a new parliament and/or president is elected. This creates a direct link between public financial reforms and the political process, providing an incentive for political actors to move toward elections in order to update or revise the budget framework.

– Ensuring flexibility within the ceiling: The budget law must clarify that although there is flexibility in how government spending is allocated within the allowed limit, no government entity can exceed the budget ceiling. This allows for oversight of public finances while enabling the government to allocate resources flexibly based on changing priorities.

2. Allocation of Non-Oil Revenues

– Structure of the Libyan budget: The Libyan budget consists of five chapters: salaries, operational (Chapter 2), development (Chapter 3), subsidies, and emergency funds. Salaries and subsidies are fixed expenditures that require stable revenue sources, while operational and development expenses are more volatile and flexible.

– Allocating Chapters 2 and 3 to non-oil revenues: In the 2025 budget law, clear allocations must be specified for the operational (Chapter 2) and development (Chapter 3) chapters, given that they are variable and subject to discretionary spending.

  • Chapter 2 (operational) should be funded from recurring non-oil revenues such as telecommunications profits, customs duties, and taxes. These consistent revenue sources will help fund operating costs. The government will be incentivized to collect them efficiently because, without them, it cannot spend on this chapter. (Translation of the local flavor: No non-oil revenues, no Camry cars for the Agricultural Police.)
  • Chapter 3 (development) can be funded by liquidating underperforming state-owned enterprise (SOE) assets. Many of these SOEs have not made profits for years, costing the state millions of dinars. Liquidating these assets would provide necessary resources for development initiatives and support economic diversification. Although the exact value of these assets is unknown, many experts estimate them to be worth billions. Once liquidated, these funds should be placed in a dedicated, ring-fenced fund and used solely to finance development efforts.

Conclusion

This mechanism ensures that the Libyan public financial reform proposal is rooted in the country’s legal framework, making it a sustainable and transparent solution. Combining a budget ceiling with diversified revenue sources through targeted allocations will enhance fiscal stability, reduce inflationary pressures, and create a more sustainable financial environment in Libya. These measures will also serve as an incentive to advance the political process toward elections while promoting fiscal discipline and economic diversification.

The change in leadership at the Central Bank of Libya presents a unique opportunity for reform. In a decade marked by divisions and missed opportunities, this momentum is a significant chance to implement lasting changes in public finance. It is essential to act quickly and decisively while this opportunity still exists, to ensure Libya takes meaningful steps toward long-term economic stability and prosperity.

Al-Farisi to Erem News: “If a Unified Budget Is Not Reached and Unrestrained Spending Continues, the Currency Will Be Devalued Repeatedly”

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In a statement to Erem Business, Professor of Economics at the University of Benghazi, Ayoub Al-Farisi, said that the International Monetary Fund (IMF) typically intervenes in a country’s economic decision-making when that country requests a loan. The IMF then seeks to ensure repayment by imposing reforms, taxes, currency devaluation, and flotation. In exchange for the loan, these recommendations become binding. However, Libya is a donor state, not a borrowing one — thus, the IMF’s decisions regarding financial reform are non-binding and merely advisory.

Al-Farisi added that the main obstacle to implementing any reform package, according to him, is the political division, which has delayed reaching an economic framework that would ease pressure on the currency. He noted that the recent currency devaluation was due to excessive spending that the Central Bank could not cover based on revenue levels and global oil prices.

He further explained that a new decision to devalue the dinar does not rest solely with the Central Bank but also depends on the state’s public financial behavior and whether a unified budget can be achieved.

He concluded by saying: “If a unified budget is not reached and unrestrained spending continues, the currency will be devalued again and again. But if financial discipline is achieved and a unified budget is approved, we are heading toward stability.”

Exclusive: Central Bank Governor Briefs Aguila Saleh on Challenges Facing the Libyan Dinar, Stresses the Need for a Unified Budget

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The Central Bank of Libya exclusively told our source that during an urgent visit, the bank’s governor provided a briefing to the Speaker of the House of Representatives, Aguila Saleh, on the latest economic and financial developments in the country. The governor outlined key challenges hindering the CBL’s efforts to strengthen the Libyan dinar, citing rising dual public expenditures, inefficiency in spending, declining oil and sovereign revenues, and a lack of coordination between policies.

During the visit, the governor reaffirmed that the CBL is working professionally and with its full staff to address these challenges. He also stressed the need for coordination between fiscal, trade, and monetary policies, emphasizing the importance of a unified budget to facilitate the bank’s operations.

Exclusive: Government of National Unity Establishes National Housing and Real Estate Development Program with Independent Budget

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Our source has exclusively obtained a decision from the Government of National Unity regarding the establishment of the National Housing and Real Estate Development Program. The program will have independent legal and financial status, with its headquarters in Tripoli, and will operate under the authority of the Council of Ministers.

According to the decision, the program aims to promote spatial development, invest in the housing sector, address housing shortages, and contribute to Libya’s economic and social development. It will develop real estate investment programs for urban communities by utilizing necessary funds and completing previously contracted housing projects through investment outside the state’s general budget. Additionally, it will work to establish a sustainable model for real estate development and investment to provide suitable housing for citizens and develop urban plans for new residential projects.

The program will be responsible for implementing national and regional housing policies, coordinating with relevant entities to execute housing projects, preparing and managing project budgets, and ensuring timely completion. It will also determine priorities for ongoing and planned housing and public infrastructure projects while overseeing their execution, either directly or through specialized consulting firms and real estate developers.

Furthermore, the program will conduct cost studies for housing projects, propose cost-saving measures, and introduce financial solutions for real estate investment by engaging with banks and private and public financial institutions. It will also facilitate loans and financial support for real estate developers and investors while securing land for new housing developments in coordination with relevant authorities.

The program has the authority to own, sell, mortgage, lease, and transfer assets in accordance with legal frameworks. It can also collaborate with local and international developers and investors to achieve its objectives. Additionally, previously contracted housing projects under other government entities and the Savings and Real Estate Investment Bank will be transferred to the program through decisions issued by the Prime Minister.

State-owned lands allocated for public housing projects will also be transferred to the program, and expropriated lands for public benefit will be registered under the state’s name. The program has the right to manage these lands through sale, lease, or partnership with developers and investors in line with existing legal agreements.

The Libyan state will fund infrastructure projects for housing developments under the program through the development budget. The program will be managed by a general director appointed by the Prime Minister and will operate with an independent budget prepared according to applicable accounting standards.

Its financial resources will include a percentage of real estate development contracts signed with investors, revenues from its activities, authorized loans and grants, budget allocations, and other approved funding sources. The program’s fiscal year will align with the state’s financial calendar, with its first year starting from the date of the decision and ending with the following fiscal year. It will also have one or more bank accounts within Libya for managing its funds, in compliance with applicable regulations.

Al-Abidi to Sada: “The 2025 Budget Will Be Unified… and These Are the Benefits of the Central Bank Administration’s Visit to Derna”

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The Second Deputy Chairman of the High Council of State, Omar Al-Abidi, revealed in a statement to our source that the visit of the Board of Directors of the Central Bank of Libya, led by Governor Naji Issa, carries significant political symbolism and reflects Libya’s commitment to unity and the fact that Libya is one united entity.

He also indicated that this visit is expected to be followed by a series of consecutive meetings of the Central Bank’s Board of Directors across various regions, including Benghazi, Sabha, Misrata, Zawiya, Zintan, and other Libyan cities.

Additionally, he stated that the 2025 budget will be a unified budget approved by the House of Representatives in consultation with the High Council of State.

Exclusive: Mrajaa Ghaith Explains That the Message on Financial Challenges Focuses on the 2025 Budget, Not the Overall Libyan Economy, with Some Side Proposals

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Mrajaa Ghaith, former board member of the Central Bank of Libya, clarified in his statement to our source regarding the open letter signed by several experts about the financial challenges facing the Libyan state. He stated that the paper is mainly related to the preparation and implementation of the 2025 budget. Its purpose is to encourage the parties involved to agree on a budget that will serve as the basis for spending in the coming year, along with measures to reduce waste, unnecessary spending, and to encourage the collection of the state’s rightful revenues. However, it does not address the overall issues of the Libyan economy, but rather focuses on the 2025 budget with some additional proposals.

Ghaith also stated: “The success of the recommendations depends on the seriousness of the parties in control of the state, and whether they have the will to combat waste and excessive spending without adhering to laws and spending through an approved budget, or whether spending will continue based on personal interests and desires.”