Previous Quarterly Editions
Expropriation Risk: 79 80 80 80 ►Political Violence Risk:74 68 68 68 ►Terrorism Risk:53 53 53 53 ►Exchange Transfer and Trade Sanction Risk: 73 73 73 73 ►Sovereign Default Risk:83 83 82 83 ►
TREND ►
Protest intensity to date* 2022 2023 Low Low Unrest risk in 2024**Cost of living: -Anti-austerity: High
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
Libya’s external debt is one of the lowest in the world, but its domestic debt has increased significantly in recent years. Under budget law, the central bank can provide advances to the government of up to one-fifth of estimated revenues in the budget. These advances should be repaid at the end of the fiscal year. In recent years, however, the government has resorted to monetary financing to cover deficits when oil revenues have fallen short of expenditures due to blockades and other conflict-related disruptions to oil production.
According to the central bank, the government was indebted to it to the tune of 90.5% of GDP in 2022. The International Monetary Fund (IMF), which this year resumed monitoring Libya after a decade-long hiatus due to the 2014 – 2020 civil conflict, notes that this is not debt in the standard sense: It is denominated in domestic currency, carries no interest and has no repayment deadline. Furthermore, this can be forgiven using administrative procedures without any economic implications.
Libya’s gross official reserves remain high, totaling US$82 billion at year end 2022, according to figures provided to the IMF. This is equivalent to over 200% of GDP and covers more than four years of imports. If oil production remains steady and fiscal spending remains at current levels, reserves are projected to rise to more than US$100 billion by 2028, according to the IMF.
Post-Muammar Gaddafi Libya remains in a political stalemate, with competing centers of power claiming legitimacy and exerting control over different parts of the country. The internationally recognized Government of National Unity (GNU), appointed as part of a U.N.-mediated process in 2021 and headed by Prime Minister Abdulhamid Dabaiba, remains in place in Tripoli. Its critics consider the GNU’s mandate expired.
The Government of National Stability (GNS), appointed by the House of Representatives in 2022 and currently led by Osama Hammad, has struggled to challenge the GNU. The GNS is based in eastern Libya, where a military dispensation headed by General Khalifa Haftar holds sway. Agreement has yet to be reached on a constitutional framework that could pave the way to Libya’s first elections since 2014 and therefore allow for a unitary government.
The resulting contestation of legitimacy, whether on an executive or legislative level, continues to feed insecurity and social fragmentation and exacerbate economic challenges. Many Libyans believe these political realities were a key factor in the high death toll (estimated at over 10,000 people) caused by floods that resulted from burst dams in the eastern town of Derna in September 2023. Local authorities were accused of failing to maintain the dams and embezzling funds allocated for their maintenance and other critical infrastructure. The political fallout from the floods will likely continue well into 2024.
The Libyan economy is still dealing with the consequences of almost a decade of war, the COVID-19 pandemic and Russia's invasion of Ukraine in 2022. Years of conflict have resulted in the destruction of human capital, basic services and infrastructure. Almost exclusively dependent on hydrocarbons, GDP growth has proved highly volatile due to conflict-related disruptions to oil production and exports. Over the past year, however, output has increased following changes in key institutions — notably the leadership of the National Oil Company (NOC) — and the continuing of a ceasefire agreed in 2020.
Hydrocarbon production is projected to grow around 15% in 2023 and increase gradually thereafter. If current global oil prices remain stable and Libya does not tip back into conflict, the country can expect to record robust state finances in the coming years. Dabaiba has a good relationship with the central bank’s governor, Sadiq al-Kabir, that has allowed him to pursue a populist government spending agenda.
Clearly mindful of the youth-driven protests that have erupted periodically in recent years, Dabaiba launched a highly popular marriage grant scheme whereby the GNU subsidizes young Libyans struggling to get married. He has rolled out other similar programs targeting low-income families, the elderly and widows. While such
gestures have helped cushion the GNU from sustained popular discontent, the grievances that have driven sporadic demonstrations since 2021 remain unaddressed, and the GNU, or whatever might replace it following elections, is likely to face further protests if living conditions are not improved.
The GNU has made progress in addressing western Libya’s chronic power shortages, but households still struggle with poor public service delivery and high food prices. Allegations of corruption within Libya’s power centers, whether the GNU or the eastern dispensation, could also fuel social unrest, particularly if the prospect of elections dims further, prompting frustrations over the status quo.
Significant obstacles to investment remain. The brittle security situation threatens all sectors, particularly oil and gas. After years of conflict, key energy infrastructure is in a state of disrepair and requires considerable investment. Other critical infrastructure, including the Man-Made River, which supplies most of the population with potable water, also needs urgent repair, prompting United Nations agencies to warn of a complete collapse of water supplies. Such warnings have become more pressing in the wake of the Derna floods.
The appointment of former central bank governor Ferhat Bengdara as chairman of the NOC in mid-2022 continues to produce significant changes within the oil and gas sector. Bengdara is pursuing a strategic plan for the NOC that will see a greater institutional shift toward gas and renewables. He also wants to rewrite Libya’s oil laws, overhaul its corporate social responsibility framework and create a mechanism for more equitable distribution of oil revenues. No further blockades have been imposed by Haftar loyalists, but the industry remains vulnerable to political and security dynamics.
Libya’s internal divisions have exacerbated an already deeply embedded culture of graft, with the country regularly ranked as among the most corrupt. Endemic corruption both feeds off and contributes to the continuing political stalemate, given that the elite have few incentives to improve governance. Popular anger rooted in the perception that corrupt political figures embezzled funds allocated to maintain the dams in Derna could yet manifest in serious challenges to the status quo, particularly in eastern Libya.
Since March 2022, the GNU has been challenged by the GNS. In the absence of a robust United Nations process, the stalemate between the governments could last beyond 2023 and risks tipping into a wider armed conflict beyond the episodic clashes that occur in Tripoli and other urban centers.
The cease-fire agreed between Haftar and his opponents in October 2020 remains fragile, and confidence-building measures between the two sides continue to be piecemeal. Backroom deals between Haftar’s camp and Dabaiba’s circle in 2022 led to the lifting of oil blockades, but Haftar may again resort to such tactics to reassert himself if political dynamics shift.
The presence of numerous militias, mercenaries and foreign forces continues to pose a considerable threat to stability. The presence of mercenaries from the Russian Wagner mercenary group in territory under Haftar’s control is of particular concern to Western powers, and they have increasingly pressured him to address it. Such efforts have not borne fruit, with Haftar instead stepping up his engagement with the Kremlin, meeting Russian President Vladimir Putin in Moscow in September 2023.
Islamic State (IS) and Al-Qaida in the Islamic Maghreb (AQIM) remain present in Libya, their networks concentrated mostly in the southern and central regions. Forces aligned with the Tripoli government and their rivals under Haftar’s command continue to target high-profile individuals in both groups and disrupt terrorist cells in several parts of the country, contributing to a decrease in attacks.
The IS threat remains moderate: The group continues to maintain sleeper cells in Tripoli and other coastal cities. AQIM, meanwhile, is considered largely dormant. A number of isolated IS attacks have occurred, most in the Fezzan region of southwestern Libya.
After episodic dips due to blockades by Haftar loyalists, oil production recovered to 1.2 million barrels per day in August 2022 and has continued to increase since. Some progress was made in efforts to reunify competing public institutions in the country’s east and west, but challenges remain, not least having parallel governments, even if the GNS has proved toothless.
The central bank, divided since 2014 due to the wider national power struggle, has taken steps to reunify, but tensions remain, particularly regarding the governor’s role. Disputes over central bank management continue to hamper the implementation of wider economic reforms.
Sanctions imposed in 2011 remain in force against several Libyan individuals and entities, most of them related to the Gaddafi regime. In recent years, sanctions have also been imposed on individuals accused of undermining Libya's political transition and individuals linked to human trafficking.
An increase in oil production has improved public accounts, but revenue streams remain vulnerable to domestic volatility and to global oil price shocks. Most of Libya’s sovereign wealth fund has been frozen under United Nations sanctions since Gaddafi’s fall; its assets were valued at US$67 billion in 2012. Requests by the Libyan authorities to lift the sanctions have been refused because the United Nations wants to see a stable government in place before doing so.
Return to contents Next Chapter
