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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.”

Among them is the expectation of GDP growth.. IMF Mission Publishes Important Report on Libya’s 2025 Economic Outlook

Written by Amira Cherni on . Posted in News. No Comments on Among them is the expectation of GDP growth.. IMF Mission Publishes Important Report on Libya’s 2025 Economic Outlook

The International Monetary Fund (IMF) mission released its concluding statement for 2025 on Libya, which includes the preliminary findings of the IMF team at the end of its official visit to Libya—an annual consultation conducted under Article IV of the IMF Agreement.

The statement said that the dispute over the leadership of the Central Bank last August, along with the disruption in oil production, negatively impacted growth in 2024. It is estimated that production contracted due to a forced decline in GDP from hydrocarbon resources. However, this was partially offset by an increase in non-oil activities, fueled by continued government spending. After the dispute was resolved, oil production recovered and is now approaching 1.4 million barrels per day.

It added: Official inflation stood at around 2 percent in 2024, reflecting the broad subsidies on goods and services. However, this figure was affected by data measurement issues. Subsidized goods and services make up about one-third of the Consumer Price Index (CPI), which was based on an outdated consumption basket covering only Tripoli. This likely led to an inaccurate estimation of inflation due to significant price differences across Libya’s regions. The Bureau of Statistics and Census has now released an updated CPI with wider geographic coverage and revised weights.

Preliminary estimates indicate a budget and current account deficit in 2024. Government spending continued to rise amid falling oil revenues due to production and export stoppages. It is estimated that the current account shifted from a large surplus in 2023 to a deficit in 2024 due to reduced hydrocarbon exports, while imports remained largely unchanged. Reserves stayed at comfortable levels, supported by the revaluation of gold holdings at the Central Bank of Libya.

The banking sector managed to raise capital and strengthen its financial soundness indicators. In late 2022, the Central Bank required banks to increase their capital to comply with Basel II regulatory requirements. Most banks met their targets in 2024, resulting in a doubling of paid-up capital. Additionally, banks’ financial soundness improved significantly, with better ratios of non-performing loans. Private sector credit growth remained strong in 2024, particularly in the form of Murabaha financing for individual clients and salary advances for public employees, while corporate financing remained limited.

The economic outlook will be driven by developments in the oil sector, with real GDP expected to grow in 2025, mainly due to expanded oil production, before slowing down in the medium term. Growth in non-hydrocarbon activities is expected to remain around the 2021–2024 average (5–6 percent) throughout the forecast period, supported by continued government spending.

Current account and budgetary pressures are expected to persist in the medium term, driven by projected declines in oil prices and ongoing government demands to fully spend oil revenues. The outlook is subject to a high degree of uncertainty, with risks skewed to the downside, especially due to domestic political instability, oil price volatility, intensifying regional conflicts, and deepening geo-economic fragmentation.

Efforts to establish a unified budget should remain a top priority, as this would help set spending priorities and strengthen fiscal credibility. In the meantime, authorities should resist pressure to increase current spending, particularly on wages and subsidies. They should also enhance public financial management, including through stronger macroeconomic coordination within the Ministry of Finance.

In the medium term, significant fiscal efforts will be necessary to maintain sustainability and intergenerational equity, including through disciplined reforms in wages, energy subsidies, and non-hydrocarbon revenue collection.

The Central Bank of Libya devalued the dinar by about 13 percent in early April and imposed further restrictions on foreign exchange to relieve pressure on reserves. In the absence of traditional monetary policy tools, controlling fiscal spending remains the preferred policy response under Libya’s macroeconomic framework.

However, given Libya’s fragile political stability and institutional fragmentation, addressing spending pressures in the short term may not be feasible. Authorities should work to narrow the gap between the official and parallel exchange rates, including by phasing out the foreign exchange tax and easing currency restrictions, while maintaining international reserves.

The Central Bank of Libya needs to develop an effective domestic monetary policy framework with a defined policy rate that can serve as a benchmark for banks in Libya. This framework would allow the Bank to respond to changes in macroeconomic conditions, ease repeated downward pressures on the Libyan dinar, and provide a benchmark for credit pricing by banks and financial institutions.

The recent efforts by the Central Bank of Libya to inject new banknotes, promote electronic payments, and accelerate financial inclusion are a welcome step. However, more work is needed to address the cash accumulation problem and restore trust in the financial sector. Improving transparency, accountability, and financial literacy, along with developing attractive savings plans, will be key to boosting credit supply to the private sector. Authorities must continue to strengthen the anti-money laundering and counter-terrorism financing (AML/CFT) framework to support the stability of correspondent banking relationships and overall economic stability. The legal framework should align with international standards, and AML/CFT risk mitigation should be appropriately coordinated and risk-focused.

To stimulate economic diversification in Libya, it is essential to address the challenges facing the private sector. Informal employment remains high due to ongoing political instability and a weak business regulatory framework. Limited access to finance and foreign currency, public sector dominance, and poor governance are key barriers to growth in Libya. Banks continue to lack a defined framework for credit expansion since the passage of the interest prohibition law. Authorities must initiate a comprehensive economic reform plan focused on private sector development, beginning with updating regulatory frameworks, improving access to finance, and enhancing the security situation.

Governance reforms will be critical to support sustainable growth. Positive steps taken by the Central Bank to improve the banking governance framework are welcome. Additionally, efforts to combat corruption—such as the publication of the Libyan Audit Bureau’s annual reports and the adoption of a national anti-corruption strategy—are notable. However, significant governance gaps remain in the management of state-owned enterprises, public spending, rule of law, and overall state fragility. Addressing these issues in a timely manner will help create a better business environment and a more vibrant private sector. The next Article IV consultation mission is expected in Spring 2026.

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Al-Mana’a writes: The International Monetary Fund and the World Bank: “The Impact of Trump’s Policies and Opportunities for Cooperation with Libya for Economic Recovery”

Written by Amira Cherni on . Posted in Economic articles. No Comments on Al-Mana’a writes: The International Monetary Fund and the World Bank: “The Impact of Trump’s Policies and Opportunities for Cooperation with Libya for Economic Recovery”

Advisor Mustafa Al-Mana’a wrote an article titled: The International Monetary Fund and the World Bank: “The Impact of Trump’s Policies and Opportunities for Cooperation with Libya for Economic Recovery.”

With the beginning of President Donald Trump’s second term in 2025, voices calling for a reassessment of the United States’ role in the International Monetary Fund (IMF) and the World Bank (WB) have increased. These two institutions are the fundamental pillars supporting financial stability and promoting development internationally. The IMF is a financial institution concerned with the stability of the global macroeconomy by providing advice on monetary and fiscal policies, supporting exchange rate stability, and enhancing fiscal discipline among member countries. Meanwhile, the World Bank focuses on long-term economic development by financing infrastructure projects, improving productivity, and enhancing the investment climate to support sustainable growth.

“The Reality of the International and National Economy”

The importance of these international institutions is growing for developing countries, including Libya, which is in desperate need of technical expertise and support to address its accumulated economic challenges. In the face of a global situation marked by high inflation and a slowdown in foreign investments, it has become necessary to explore opportunities for Libya’s economic recovery and the potential benefits from these two institutions.

In 2025, the global economy is experiencing “relative” stability accompanied by economic challenges. After the impacts of the war in Ukraine and Gaza, and prior to that the COVID-19 pandemic and supply chain disruptions, inflation rates in many major economies, particularly the United States and the Eurozone, have risen. Emerging economies have faced a slowdown in growth rates, and the rise in interest rates by major central banks has negatively impacted foreign investment flows, complicating global economic forecasts. However, major economies such as the United States and China continue to experience relative growth, driven by investments in sustainable sectors like renewable energy and digital technology, in addition to benefiting from the inherent strength of their economies, their market dominance, and the returns from political hegemony over other nations.

As for the Libyan economy, despite the challenges it faces, indicators show a significant improvement in growth rates. According to the IMF’s projections for 2024, the Libyan economy is expected to grow by 7.8% after a contraction in 2022. For 2025, there are no precise estimates, but growth is expected to remain positive, driven by improvements in oil production and global oil prices.

Nonetheless, this growth remains vulnerable to fluctuations in global oil prices, as well as political and economic challenges at the local level, with early signs of the Libyan dinar’s depreciation against foreign currencies.

“Opportunities for Libyan Economic Recovery”

Libya, which relies heavily on oil revenues, faces deep structural economic challenges such as a lack of economic diversification, compounded by poor public financial management and imbalances within the banking system. However, there are real opportunities for economic recovery if comprehensive reform policies are adopted to address these issues at their roots, such as improving the management of oil revenues, expanding non-oil revenue sources, and implementing structural reforms in the banking system. In this context, there is an urgent need for cooperation with international financial institutions, especially the IMF and World Bank, to leverage their technical expertise and supporting programs to help achieve economic reforms and sustainable development.

“Benefiting from Technical Support and International Expertise”

During the annual meetings of the IMF and the World Bank, the latest of which was in October 2024, and during our meetings with IMF President Kristalina Georgieva, World Bank President David Malpass, and senior managers of both institutions, the importance of the technical support provided by these institutions to assist Libya in implementing comprehensive economic reforms, improving governance, and developing digital infrastructure was emphasized. This cooperation, including with institutions like the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), is aimed at boosting Libya’s attractiveness for foreign investments, developing non-oil sectors, and creating job opportunities.

In February 2025, in line with Prime Minister Abdulhamid Dbeibeh’s efforts to benefit from the technical and advisory support of these international institutions to improve Libya’s economic situation, a high-level delegation from the World Bank, led by the Vice President for the Middle East and North Africa, Mr. Othman Dion, visited Libya. The discussions focused on enhancing cooperation between Libya and the World Bank in key areas such as digital transformation, increasing financial transparency, improving the business environment, enhancing the efficiency of public institutions, and correcting the structure of public spending. These meetings culminated in an agreement to reopen the World Bank office in Libya after years of closure, reflecting both parties’ desire to strengthen cooperation and support Libya’s economic reform path.

In conclusion, Libya still has real opportunities for economic recovery. However, achieving this requires moving away from relying solely on our own capabilities and abandoning the inherited Libyan ego that prevents us from seeking international expertise. Implementing comprehensive economic reforms requires specialized technical support, which can be gained through cooperation with the IMF, the World Bank, and other specialized international institutions. This will enhance economic sustainability and reduce over-reliance on oil revenues. While economic recovery files are available, their success requires continuous professional work, which the Libyan administrative apparatus lacks due to decades of crises and shortcomings.

The technical advice provided by these institutions and the use of their experts and programs is an opportunity that countries with significant economic potential, such as Saudi Arabia, the UAE, South Korea, Japan, and others, have not missed. Cooperation has not been linked to borrowing but to advisory support and strengthening financial stability.

Al-Zantouti Writes: “Our National Economy Between the Dinar Devaluation, Reserve Drain, and the IMF”

Written by Amira Cherni on . Posted in Economic articles. No Comments on Al-Zantouti Writes: “Our National Economy Between the Dinar Devaluation, Reserve Drain, and the IMF”

Financial expert Khaled Al-Zantouti wrote an article stating: “In these blessed Ramadan days, we continue to receive troubling news and statistics. From horrific traffic accidents, leading to a significant number of deaths, to reports from the Central Bank highlighting the severe economic difficulties and the weakness of our economic structure. Our economy is built on a disastrous dual government spending shared by two competing governments, as if we were two separate countries, each with numerous shadow governments operating under different “legitimacies,” all trying to seize control to embed mismanagement, corruption, regionalism, and power struggles.

Major global newspapers accuse us of oil smuggling, with ships leaving national ports disappearing from radar, and no one knows where or how they go or who is behind them. There are also accusations of certain names and companies (allegedly private) collaborating with public institutions to oversee and execute “respectable” smuggling deals worth billions. We cannot confirm or deny these claims, but as the saying goes, “Where there’s smoke, there’s fire.” I won’t generalize, but let us take a look at the facts of some of the numbers published these days, summarized as follows:

  • Oil revenues deposited into the Central Bank over 17 days amounted to approximately 778 million dollars, while foreign currency sales reached 2.3 billion dollars. This means our dollar expenditure is about three times our dollar income.
  • Personal transfers accounted for almost 100% of documentary credits, meaning our personal expenses match what we import for food, drink, healthcare, transport, and so on.
  • Most of these personal expenses benefit from the difference between the official and parallel exchange rates, after commissions from Turkish and Emirati exchange companies and their Libyan partners.
  • If we continue on this path, we will need to use our reserves, possibly drawing 3 billion dollars a month. This means we will lose about 36 billion dollars annually from our reserves to cover the dollar financing gap, and we will completely deplete our reserves within two and a half years. After that, we’ll have nothing left but speculation and uncertainty, except for the fortunate few.

At the same time, some “economists” claim that oil will never fall below 80 or 70 dollars. Don’t they know that oil recently dropped to 30 dollars due to a surplus of oil supply? Could this happen again at any moment, especially with Trump’s policy, which repeatedly emphasizes reducing oil prices to below 50-60 dollars? With the potential for closer US-Russian relations and the possibility of Russia exiting the OPEC+ agreement, if oil prices drop to 50 or 60 dollars, we will burn through our reserves in a matter of months. And then, “God help us.”

There are no solutions for the Central Bank if this tragic situation continues, except for a dinar devaluation into the double digits, possibly bringing us under the control of the IMF and the World Bank. In such a case, we would have to adhere to their “magical” remedies and face their demands.

In these last ten days of Ramadan, we must turn to God, work towards unity, learn from history, and tackle corruption, mismanagement, and division. We pray for the success of the sincere people of our nation.”

Al-Zantouti: IMF’s Latest Statement – Economic Hypocrisy and Hollow Recommendations

Written by Amira Cherni on . Posted in Economic articles. No Comments on Al-Zantouti: IMF’s Latest Statement – Economic Hypocrisy and Hollow Recommendations

Financial expert Khaled Al-Zantouti penned an article criticizing the recent statement by the International Monetary Fund (IMF) regarding Libya, describing it as “economic hypocrisy” and filled with “hollow recommendations.”

Al-Zantouti highlighted the IMF’s acknowledgment of Libya’s “positive turning point after a decade of board stagnation,” questioning the organization’s silence and inaction during those ten years. He pointed out that despite annual meetings under Article IV regarding Libya, the IMF failed to push for urgent reforms to address the governance freeze.

He also criticized the IMF’s statement calling for “a more organized leadership transition to enhance stability and improve governance,” arguing that such flaws in governance have been evident for years. Al-Zantouti emphasized the IMF’s failure to introduce actionable programs to enhance governance during its previous meetings.

Regarding the recurring recommendation to “control spending,” Al-Zantouti labeled it as generic and ineffective. He urged the IMF to provide specific operational advice, detailing which expenditures should be curbed, their responsible entities, and the mechanisms to achieve this—similar to its tailored guidance for borrowing countries.

The article also challenged the IMF’s reliance on Libya’s oil revenues as a basis for economic growth. Al-Zantouti argued that the organization should advocate for income diversification strategies instead of continued dependence on oil, a volatile and politically sensitive resource, offering practical suggestions to achieve this goal.

Finally, Al-Zantouti criticized the IMF’s praise for the Central Bank of Libya’s efforts to facilitate access to foreign currency. He warned that this ease of access, without proper regulation and effective monetary policies, could have adverse long-term effects on exchange rates and both macro and microeconomic stability.