1st October 2015 Tripoli, Libya
WHO CARES ABOUT THE ECONOMY?
Who am I? I live in a country that sits on enormous wealth. But this country turned in the worst economic performance in the world in 2014 and was 188th out of 189 countries in the World Bank’s Doing Business report.
This is Libya. A country with the largest oil reserves in Africa and a population of only 6 million people. The statistics are pretty alarming:
- In 2010 the IMF estimated that Libya would have growth of over 7% in 2014, the highest in the Middle East. The reality was minus 24%, the worst GDP figure in the world.
- Libyans’ average income per capita in 2010 was almost $12,000, the same as some European countries. In 2014 it had fallen to $6,570.
- Libya used to earn more than it spent, enjoying the second largest fiscal surplus in the Middle East. Now the situation is reversed: the government is spending a lot more than it earns and is running a fiscal deficit of over 40%, the largest in the world.
- Libya also used to export more than it spent on imports. In 2014 the country imported USD 12.4bn more than it exported. The World Bank estimates the current account deficit could increase to 70% of GDP in 2015.
- As a result, Libya’s foreign reserves are being used up. In January 2014, Libya had a comfortable $121 billion in the bank. By the end of 2015 the World Bank estimates there will be just $55 billion left.
- Hard currency was once freely available to Libyans wishing to travel or purchase from abroad. Now it is only available on the black market at twice the official rate of exchange. As Libyan reserves fall this gap will only widen.
Who cares about statistics? There are, after all “Lies, Damned Lies and Statistics.” But all Libyans should care about the fact that their country is facing bankruptcy. There is a scenario round the corner when the imports they depend on – from food to fuel – can no longer be afforded. This is indeed an alarming prospect.
Many will blame the international community for this economic crisis. It is true that one key factor is outside Libya’s control: the fall in world oil prices. But most of the problems stem from decisions taken within Libya: the reduction in production because of the lack of security for oil installations; the huge increase in government expenditure funding salaries in the public sector; and the lack of investment because of the continuing lack of stability in most parts of the country.
If that turmoil continues, the economic situation will certainly get worse. If the political dialogue succeeds, there is a prospect that it will improve. The improvement will not happen overnight. It will take time.
Libya desperately needs a Government of National Accord in Tripoli to begin the task of mending Libya’s injured economy. That government will have a huge list of priorities: to get the electricity working, to get the oil flowing, to clean the streets and get public services like schools and hospitals up and running effectively. All Libyans therefore need to get behind the efforts of the political dialogue to reach agreement, just as they were behind removing Qadhafi.
International donors and businesses are watching and waiting to offer support and assistance to the new Government. Outside help will be needed to help rebuild government services and fix the many aspects of ordinary life that have broken down. Many countries, including the United Kingdom and the European Union are ready to respond to an invitation from the future government of Libya for such help.
A classic quote about an employee was: “She should go far. The sooner she starts the better.” The same holds true for Libya. The sooner a political agreement is reached the better. When it is implemented, Libya should go far.
Actually, I really do live in Libya. I was here during the 2011 revolution and saw/heard the terrible fight 2 rid Libya of Gaddafi. We all hoped for the best, but greed for wealth and power set in – our so-called ‘governments’ gobbled a lot of Libya’s wealth, and gangs and ruthless individuals took what they wanted. The world looked on as ISIS flocked to Libya, anxious for oil to fund it’s ‘jihad.’ A people who had been ruled by a tyrant in all aspects of their lives suddenly found themselves thrown in the deep end with little outside help or advice. It’s now the 17th December and we have learnt that we may have a unity gov . . . not too sure . . . some confusion . . . we don’t really know who chose this gov. for Libya. If only all this attention had been given to Libya in that first critical year after the revolution.
But I’ve got hope things will turn out for the best . . Libya and it’s good people deserve it. We need patience and help from people who truly want the best for Libya as well. Thankyou
Very true. Luckily, Libya is still a curable case. However, given the lack of sophisticated social framework, a national unity government in Tripoli needs a tremendous help in order to monopolize the legitimate use of physical force over Libyan territories; to establish the peace and enforce the rule of law. Without peace and security, the economy will never recover.
Mr Ambassador,
You state 6 statistical bulletpoints 1 to 6.
Bulletpoints 1 to 4 and bulletpoint 6 clearly indicate that Libya and Libyans were much better off pre 17th of February “revolution”! If this is the case, as evidenced by your statistics, why on earth did your government push so hard by using military action to destroy the country resulting in the mess that it is today.
The Libyans need to get behind and work with a National Unity Government. This is the best hope to turn around the rapidly deteriorating situation.
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The New Libyan Government Should Seek International Support Right Away to Run the Economy
By H.E. Ahmed Safar, The Libyan Ambassador in Rome
As Libya moves closer and closer to securing a long-waited political settlement and forming a government of national accord (GNA), the international community that has been instrumental in helping Libyans reach a political deal based upon peace-building measures will need to continue to support Libya long enough for peace to materialize and a fair chance of rebuilding the country is secured for the benefit of the Libyan people.
It is well documented that post-conflict peace-agreements are at high risk of collapse within the first 12 months of their inception, especially if overwhelming national and international expectations become difficult to manage within the short-term, as expected to face the GNA. Stimulating the economy as a whole but also injecting capacity in local economies as well, as soon as possible, can go along way in creating favorable conditions in securing peace within the first year of a post-recent-conflict Libya. Too much focus on security arrangements can drive focus and valuable resources away from such vital revitalization task, which is much needed for Libya’s collapsing economy. Ideally, using economic incentives, only when actually needed, to support security solutions and as an exchange for stability can be part of the wider approach to implementing security to a reasonable degree of normalization.
Obviously, such enormous task will have to rely upon a readily available capacity within both the economy and the administration. Both have greatly suffered under Ghadafi and further debleted by the recent conflict. This is a well-identified need ahead of any GNA, and should be an immediate task of the GNA to source direct international assistance based upon a criterion of 1)good international practice, 2)well-documented expertise in post-conflict settings and 3)a balanced political engagement with all parties throughout the conflict. Libya lacks an important skill-based foundation for its economy in many sectors, this can be one area of assistance in direct relevance to the economy of the job market. Creating pockets of what I call “cleaver demand-driven” initiatives while designing and implementing supply-side Libyan capacities can be executed on both national and local levels. One key risk factor that the GNA needs to mitigate is not to fall for the “Experts” trap. Fly-in fly-out consultants and can-do-all consultancy firms have added to Libya’s confused management of international assistance in the past three years – so do be careful this time round!
A final word of wisdom, it’s only those who have been honest enough as “honest brokers” throughout Libya’s troubled political turmoil who qualify as ideal candidates for providing such swift, trusted technical assistance to the GNA, with Libya’s best interest at heart. Time will be the scarcest resource of them all.
I agree with you in diagnosing the problem, but you put the solution in the draft do not agree, by the application of tough points, and the two parties do not want to give up, and the manner in which it dealt with the UN envoy. There are a lot of mistakes.
Must re-think of a good way to help the Libyans.