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International Monetary Fund
This paper presents a detailed analysis of the average fiscal policy responses of oil producing countries (OPCs) to the recent oil price cycle. We find that OPCs worsened their non-oil primary balances substantially during 2003-2008 driven by an increase in primary spending. However, this trend was partially reversed when oil prices went down in 2009. We also find evidence that fiscal policy has been procyclical and has hence exacerbated the fluctuations in economic activity. In addition, we estimate that a small reduction in oil prices could lead to very large financing needs in the near future. Finally, we show that long-term fiscal sustainability positions in OPCs have worsened.
International Monetary Fund. External Relations Dept.

After the lifting in 2003–04 of international sanctions, which had lasted more than 10 years, Libya decided to undertake structural reforms and accelerate its transition to a market economy. While the authorities have recently made progress in liberalizing the economy, it remains largely state-controlled and nondiversified. Three-fourths of employment is still in the public sector, private investment is minuscule (2 percent of GDP), and the oil sector is dominant.