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International Monetary Fund. Middle East and Central Asia Dept.
Libya remains a fragile state trapped in political uncertainty. Episodes of active conflict have become less frequent, but the country remains de facto divided between the West and the East and fragmented among various militias with competing objectives. The political economy constraints and inadequate capacity hinder the authorities’ ability to implement Fund policy advice.
International Monetary Fund. Middle East and Central Asia Dept.
Selected Issues
Nehmat H Hantas and Sebastien Clanet
The International Monetary Fund (IMF)’s Middle East Regional Technical Assistance Center (METAC) is currently assisting the Central Bank of Jordan (CBJ) in enhancing its risk-based supervision through the development of a Supervisory Review and Evaluation SRP framework inspired from European Central Bank (ECB) methodology. The Technical Assistance (TA) mission is part of a multi-step medium-term project. The TA mission aimed to design, in coordination with CBJ, a progressive multi-step roadmap defining the major milestones for a full implementation of SRP. The mission noted that several dimensions should be taken into consideration when implementing the SRP, most notably bridging the data gap by building a fully-fledged supervisory risk database through a dedicated IT project, assessing whether the current organization of the Banking Supervisory Department should be adjusted, and progressively cover all material sources of risks in the SRP.
International Monetary Fund. Middle East and Central Asia Dept.
This 2023 Article IV Consultation discusses that Libya’s institutional framework has helped the country through a period of significant macroeconomic volatility and turmoil. There have been exceptional swings in oil production and revenues since 2011. The economy contracted sharply in 2020 due to an oil blockade and a decline in oil prices, resulting in ballooning external and fiscal deficits, and declining foreign exchange reserves. Libya’s economic fortunes will hinge on oil and gas production for the near future. Hydrocarbon production is projected to grow by around 15 percent in 2023 following an increase in oil production from 1 million barrels per day in 2022 to around 1.2 million barrels per day in 2023 and increase gradually thereafter. Looking ahead, assuming fiscal spending remains contained, the baseline projection is for fiscal and external surpluses to gradually decline over coming years. The key risks to the outlook are lower oil prices due to lower-than-expected global growth, and renewed conflict and/or social unrest that leads to disruptions in oil production.
International Monetary Fund. Middle East and Central Asia Dept.
This 2023 Article IV Consultation discusses that Libya’s institutional framework has helped the country through a period of significant macroeconomic volatility and turmoil. There have been exceptional swings in oil production and revenues since 2011. The economy contracted sharply in 2020 due to an oil blockade and a decline in oil prices, resulting in ballooning external and fiscal deficits, and declining foreign exchange reserves. Libya’s economic fortunes will hinge on oil and gas production for the near future. Hydrocarbon production is projected to grow by around 15 percent in 2023 following an increase in oil production from 1 million barrels per day in 2022 to around 1.2 million barrels per day in 2023 and increase gradually thereafter. Looking ahead, assuming fiscal spending remains contained, the baseline projection is for fiscal and external surpluses to gradually decline over coming years. The key risks to the outlook are lower oil prices due to lower-than-expected global growth, and renewed conflict and/or social unrest that leads to disruptions in oil production.
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper provides an overview of the challenges facing the banking sector in Libya and puts forward reforms to strengthen financial stability and accelerate credit growth. Priority reforms are identified using the 2012 sound principles for effective supervision, issued by the Basel Committee for Banking Supervision (BCBS), while also considering limitations imposed by the country’s fragility and conflict situation. Banks are struggling to develop Islamic finance products. Financial stability mandate and governance architecture should be strengthened. Financial stability mandate and governance are not clearly articulated in the banking law. Comprehensive internal and external reporting systems should be developed to strengthen management facilitate supervision. The paper recommends that the authorities follow a gradual and consultative approach to regulatory reforms and support the development of human capital and systems at the commercial banks and at the Central Bank of Libya.