Previous Quarterly Editions
Expropriation Risk: 78 79 79 80 ►Political Violence Risk:74 74 74 68 ▼Terrorism Risk:55 55 53 53 ▼Exchange Transfer and Trade Sanction Risk: 64 64 73 73 ►Sovereign Default Risk:75 83 83 83 ►
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Protest intensity in 2022 and Q1 2023* 2022 Q1 2023Cost of living : Low LowAll protest: Low Low
Cost-of-living protest risk in 2023*Wage protest: -Food/fuel policy protests: -
*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 calculations, see the introductory essay.
Post-Gaddafi Libya remains in a political stalemate with competing centres of power claiming legitimacy and exerting control over different parts of the country. The internationally recognised Government of National Unity (GNU) – appointed as part of an UN-mediated process in 2021 and headed by Prime Minister Abdul Hamid Dbeibeh – remains in place in Tripoli. Its critics consider the GNU government’s mandate expired, however, as elections to produce a unified government did not take place in late 2021, whereas the polls had been envisaged under a UN roadmap.
The Sirte-based Government of National Stability (GNS) – appointed by the House of Representatives in early 2022 and led by Fathi Bashagha – has struggled to challenge the GNU. In eastern Libya, 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 the country’s first elections since 2014 and therefore allow for a unitary government to be established. The resulting contestation of legitimacy – whether on an executive or legislative level – continues to feed insecurity and social fragmentation, in addition to exacerbating economic challenges.
The Libyan economy has been pummelled by almost a decade of war, the COVID-19 pandemic, and now Russia's invasion of Ukraine from February 2022. Years of conflict have resulted in the destruction of human capital, basic services, and infrastructure, leading to the country’s decline to lower middle-income status. 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 – most notably the leadership of the National Oil Company (NOC) – and the continuing of a ceasefire agreed in 2020.
Hydrocarbon production is projected to grow by 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. Dbeibeh has a good relationship with central bank governor Sadiq al-Kabir and that has allowed him to pursue a populist agenda when it comes to government spending.
Clearly mindful of the youth-driven protests that have erupted periodically in recent years, Dbeibeh launched a highly popular marriage grant scheme whereby the GNU subsidises young Libyans struggling to get married. He has rolled out other similar programmes targeting low-income families, the elderly, and widows. While such gestures have helped cushion the GNU from sustained popular discontent, nationwide protests in July 2022 showed how frustrations can easily boil over. The grievances driving those demonstrations remain unaddressed, and the GNU, or whatever might replace it following elections, is likely to face further protests if living conditions are not improved.
Households struggle with chronic power outages and poor public service delivery. Given that Libya relies on Ukraine for more than 40% of its wheat stocks, the fallout from the Russia/Ukraine crisis has already driven up prices and could lead to more serious food insecurity and possible social unrest.
Allegations of corruption within the GNU could also fuel social unrest, particularly if the prospect of elections dims further, prompting frustrations over the status quo.
TREND ►
Significant obstacles to investment remain. The brittle security situation poses a threat to 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 Great Man-Made River, which supplies most of the population with drinkable water, also needs urgent repair, prompting UN agencies to warn of a complete collapse of water supplies.
The appointment of former central bank governor Farhat Bengdara as chairman of the NOC in July 2022 has led to significant changes within the oil and gas sector. Haftar loyalists ended their blockades, allowing production to increase, but the industry remains vulnerable to political and security dynamics. Bengdara is pursuing a strategic plan for the NOC that will see a greater institutional shift towards gas and renewables. He also wants to rewrite Libya’s oil laws and overhaul its corporate social responsibility framework.
Libya’s internal divisions have exacerbated an already deeply embedded culture of graft (when public money illegally comes from an official to another party) with the country regularly ranked as among the most corrupt in the world. Endemic corruption both feeds off and contributes to the continuing political stalemate, with elites having few incentives to improve governance.
Since March 2022, the GNU has been challenged by the GNS. In the absence of a robust UN process, the stalemate between the governments could last beyond 2023 and risks tipping into a wider armed conflict beyond the episodic clashes in Tripoli and other urban centres.
The ceasefire 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 Dbeibeh’s circle in summer 2022 led to the lifting of oil blockades, as noted above, 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 particularly concerning to the U.S. and other Western powers, and they have increasingly pressured him to address it.
Islamic State (IS) and Al-Qaeda in the Islamic Maghreb (AQIM) remain present in Libya, with their networks concentrated mostly in 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 threat from IS 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 taken place, most of them in the Fezzan region of south-western 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 continue to increase since. There was some progress in efforts to reunify competing public institutions in the country’s east and west, but challenges remain, not least the risk posed by the existence of 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 role of Sadiq al-Kabir, the long-serving governor. Disputes over central bank management will 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. Libya’s external debt is one of the lowest in the world, but domestic debt has increased significantly in recent years.
Most of Libya’s sovereign wealth fund has been frozen under UN sanctions since former leader Muammar Gaddafi’s fall, with assets valued at USD67 billion in 2012. Requests by the Libyan authorities to lift the sanctions have been refused because the UN wants to see a stable government in place before doing so.
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