LIBYA ECONOMIC MONITOR Summer 2022 Libya Economic Monitor Summer 2022 Middle East and North Africa Region © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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TABLE OF CONTENTS Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix 1.  Conflict Situation Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.  Recent Economic Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Volatile Oil Production and, in Turn, Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Escalating Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Strong 2021 Fiscal Surplus and Uncertain 2022 Spending and Revenue Arrangements . . . . . . . . . . . . . . . 10 Rebound in External Balances and Persistence of Liquidity Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 3. Social Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Improving the Humanitarian and Epidemiological Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Challenges in Meeting Essential Food and Non-Food Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Limited Access to Basic Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.  Outlook & Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Annex: The Impact of the Russia-Ukraine Crisis on Libya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 iii List of Figures Figure 1 Conflict Events and Fatalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 2 Population and Population Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Figure 3 Evolution of Real GDP Compared to Benchmarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 4 GDP Per Capita . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Figure 5 Oil Production and Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Figure 6 Real GDP Growth (% change) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Figure 7 Real GDP and Sectoral Growth Rates (percent change, annual) . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Figure 8 Sectoral Contribution to Annual Real GDP Growth (percent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Figure 9 IDP and Migrant Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Figure 10 Libya and Comparators’ Human Development Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 11 Worldwide Governance Indicators (percentile rank) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Figure 12 Overall Inflation Rate & Food and Drink Inflation Rate (% change, y-o-y) . . . . . . . . . . . . . . . . . . . . . .9 Figure 13 MEB and Food-MEB Inflation Rate (% change, y-o-y) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 14 Contribution to Inflation Rate by Spending Category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 15 Food-MEB Inflation Rate by Region (% change, y-o-y) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 16 Budget Balance (Share of GDP) (LYD billions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Figure 17 Government Revenues and Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 18 Public Debt Stock in Libya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 19 Trade in Goods (in US$ billion) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Figure 20 Official and Parallel Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Figure 21 Money Supply (annual change in percent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Figure 22 Broad Money as a Share of GDP and Currency Outside of Banks as a Share of Broad Money (in percent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Figure 23 COVID-19 Cases and Deaths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Figure 24 Regional COVID-19 Vaccination Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Figure 25 People in Need of Emergency Humanitarian Food Assistance as a Share of Total Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Figure 26 People in Need of Essential Primary Healthcare as a Share of Total Population . . . . . . . . . . . . . . 17 Figure A.1 Composition of Libya’s Imports  by Source Country (average 2016–2020) . . . . . . . . . . . . . . . . . .22 Figure A.2 Libya and Comparator’s Wheat Imports by Source Country (average 2016–2020) . . . . . . . . . . .22 Figure A.3 Share of Libyan Wheat and Cereal Imports from Russia and Ukraine (average 2016–2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Figure A.4 Inflation Rate for Basic Staples (y-o-y %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 List of Boxes Box 1 The Median Cost of the Minimum Expenditure Basket (MEB) as an Alternative Measure of Inflation in Libya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 iv LIBYA ECONOMIC MONITOR ABBREVIATIONS BSC Bureau of Statistics and Census NOC National Oil Company CBL Central Bank of Libya OCHA Office For the Coordination of CMWG Cash & Market Working Group Humanitarian Affairs COVID-19 Corona Virus Disease 2019 OFDA Office of U.S. Foreign Disaster CPI Consumer Price Index Assistance GDP Gross Domestic Product OPEC Organization of Petroleum Exporting GNI Gross National Income Countries GNS Government of National Stability PHC Primary Healthcare GNU Government of National Unity SDR Special Drawing Rights HDI Human Development Index U.N. United Nations IMF International Monetary Fund UNHCR United Nations High Commissioner for JMMI Joint Market Monitoring Initiative Refugees LYD Libyan dinar US$ U.S. dollar MBD Million Barrels per Day WFP World Food Programme MEB Minimum Expenditure Basket WHO World Health Organization MENA Middle East and North Africa y-o-y Year on year MSNA Multi-Sectoral Needs Assessment v PREFACE T his report is the product of the Middle East (Resident Representative), Eric Le Borgne (Practice and North Africa (MENA) Region of the Manager), and Abdoulaye Sy (Lead Economist). World Bank Group. The report was prepared The findings, interpretations, and conclusions by Dalia Al Kadi (Senior Economist), Zied Ouelhazi expressed in this Monitor are those of World Bank (Economist), Mohammad al Akkaoui (Economist), and staff and do not necessarily reflect the views of Ali Ibrahim Almelhem (Economist). This report was the Executive Board of The World Bank or the prepared under the direction of Jesko S. Hentschel governments they represent. (Country Director), Henriette von Kaltenborn-Stachau vii EXECUTIVE SUMMARY L ibya is struggling to cope with a trifecta of 2020. However, as the postponement of national crises, including the civil conflict, the CO- elections in December 2021 was accompanied by VID-19 pandemic and most recently, the heightened political and security uncertainty, oil pro- impact of the Russia-Ukraine crisis. Notwithstand- duction dipped during the first quarter of 2022, a lev- ing the tempering of conflict intensity since 2021, the el that was 4.4 percent lower than the 2021 average. Libyan economy has been battered by the conflict. It has since declined further during the second quar- GDP per capita estimates in 2021 stood at about half ter of the year. of its value in 2010 before the start of the conflict. Despite the significant limitations faced Since 2020, the population has been hit by multiple by the two key sources of data on prices, they waves of the COVID-19 pandemic. The health system, offer a consistent story of increasing inflationary already affected by a decade of conflict, has strug- pressures during 2021 and through the first gled to deliver the necessary access and quality of quarter of 2022. The two key sources of data on care amid a raging pandemic. While Libya has report- prices are the official CPI inflation rate and the ed a marked decline in COVID-19 cases and deaths inflation of the Minimum Expenditure Basket (MEB)1 since March 2022, the vaccination rate remains low measured by the REACH initiative. Official CPI (32.3 percent of the population were vaccinated, and inflation figures are likely a gross underestimate of 17 percent were fully vaccinated by end-May 2022). the actual inflation rate as they rely on data collected In addition, food insecurity has worsened, precipi- primarily from Tripoli, given the challenges associated tated by the Russia-Ukraine crisis and the resulting with data collection across the country in a complex shortages and price increases for staple foods in the political and security landscape. The MEB inflation domestic market. rate suffers from its limitations, including the narrow While Libya witnessed a significant re- scope of products in the basket, questions of national bound in economic growth in 2021, it has been representativeness of the rate, and underestimation experiencing volatility in the hydrocarbon sec- due to measuring the lowest available price for each tor, the mainstay of the economy, in 2022. Oil production in 2021 accelerated rapidly (an average 1 The MEB is the minimum culturally adjusted items of 1.2 million barrels per day (mb/d) compared to required to support a Libyan household for a month. The 0.4 mb/d in 2020) following the lifting of the oil ex- MEB is measured by the REACH initiative on a monthly port blockade that lasted for much of the year in basis and across most local markets in the country. ix product in the basket. Regardless, figures from these hydrocarbons denominated in US$). As a result, gov- sources reveal increasing inflationary pressures. ernment spending in LYD increased by 87 percent in The official inflation rate recorded an estimated 2.8 2021 with rises across all major budget categories or percent in 2021 compared to 1.4 percent in 2020 chapters; however, given the 70 percent depreciation and –2.2 percent in 2019. In 2022, it progressively of the exchange rate in January 2021, this represent- increased, reaching 5.7 percent in March 2022 ed a spending drop of 44 percent in USD equivalent. compared to the same month in 2021. By May 2022, The fiscal spending outlook for 2022 the MEB was 32.2 percent higher than in May 2021 is uncertain. Without an approved budget, the and 49.5 percent higher than in March 2020 at the Government of National Unity has been spending on start of the COVID-19 pandemic. essential line items (wages and salaries of civil ser- Prices of essential goods (food and drinks, vants, social transfers, subsidies) based on the 1/12 housing, electricity, water, gas and other fuels, rule, with limited accountability and transparency. and transportation) are the main contributors to The House of Representatives’ recent approval of the Libya’s higher official inflation rate since 2021. GNS budget increases pressure on the Central bank Disruption of supply chains due to the civil conflict and of Libya (CBL) regarding transfer of funds to the two COVID-19 containment measures and the reliance rival governments. Declining oil revenues and the de- on costly alternative sources of water and electricity cision to retain revenues in the Libya Foreign Bank generation contributed to price increases. The Russia- account of the National Oil Company rather than Ukraine crisis has also contributed to inflationary transferring them to the CBL limit the authorities’ abil- pressures in the past months through its impact on ity to finance spending. food prices. Libya relies significantly on wheat and Libya’s debt stock is large but manageable cereal imports from Russia and Ukraine (54 percent as long as hydrocarbon production and exports of wheat and meslin imports, 65 percent of barley persist. At the end of 2021, the public debt stock was imports, and 72 percent of maize or corn imports).2 estimated at LYD 156 billion, representing 83 percent In the wake of the Russia-Ukraine crisis, the inflation of GDP. Public debt is domestic and denominated in rate of the food portion of the MEB shot up to 40.6 LYD. In contrast, government revenues are primarily percent year-on-year in April 2022 before declining to sourced from oil exports denominated in USD. It is a still high 31 percent in May 2022. The median cost expected that the ease of servicing state liabilities of the food portion of the MEB in May 2022 stood at has increased since 2021 due to the increase in 14 percent higher than the pre-crisis level in February hydrocarbon revenues and the strong depreciation of 2022. The price of the cheapest brand of flour was the official exchange rate in early 2021. 17 percent higher in May 2022 than in February Libya’s trade and current account balances 2022. Prices of couscous and bread in May 2022 rebounded in 2021 and early 2022, thanks to were 80 percent and 34 percent higher, respectively, recovering oil exports and receipts. In 2021, compared to February 2022. This translates into Libya’s exports more than tripled as global oil prices higher inflation and likely lower consumption and soared and oil export volumes recovered following the could push vulnerable and poor households that removal of the 2020 blockade on oil export terminals. are mainly net food buyers further into poverty and Consequently, despite doubling goods imports situations of hunger. compared to 2020, the trade balance is estimated to The fiscal balance witnessed a massive re- have recorded a surplus of 21.7 percent of GDP in versal from a 64.1 percent of GDP deficit in 2020 2021 (compared to a deficit of 14.7 percent in 2020). to a 10.6 percent of GDP surplus in 2021. This re- Similarly, the current account reversed course, from sulted from the jump in oil production and prices and a deficit of 15.3 percent of GDP in 2020 to a surplus the exchange rate devaluation (much of the spending (particularly wages) was denominated in LYD, where- as 98 percent of revenues in 2021 were sourced from 2 Average over 2016–20. x LIBYA ECONOMIC MONITOR of 21.1 percent in 2021. Data on trade in goods for soaring global oil prices, which would translate into January and February 2022 reveal a trade surplus of strong economic growth, higher fiscal revenues and US$ 5.3 billion. an inflow of hard currency. This would positively affect Net international reserves remain at a the trade, current account, and fiscal balances. comfortable level. Estimates reveal that Libya’s Downside risks are high. The primary down- reserve position remains very comfortable, with side risk is a backslide into violence and armed reserves in 2021 at 46 months of imports and 3.7 conflict. Further outbreaks of COVID-19 and/or the times broad money (M2), thanks to the steady inflow emergence of new variants pose a risk. The war in of U.S. dollars in the form of hydrocarbon export Ukraine may lead to further supply chain disruptions revenues. Since the devaluation of the exchange rate and sharper than expected agricultural product price in January 2021, the wedge between the official and increases. High global fuel prices may raise the pric- black-market rates has narrowed significantly. The es of other imported goods, leading consumers’ pur- official rate remained relatively stable throughout chasing power to decline and likely resulting in lower 2021, but depreciation pressures are increasing, with consumption, increased food insecurity, and greater the dinar experiencing a 7.4 percent devaluation since use of negative coping mechanisms by vulnerable January 2021 (4.6 percent devaluation since end- households. The presence of rival governments in the 2021). Libya’s liquidity crisis persists, with adverse East and West, and ongoing negotiations around the implications for households and businesses. management and use of oil revenues, may complicate The economic outlook is uncertain. It is government spending, thereby impeding the state’s impossible to forecast economic outcomes with any ability to deliver public services and finance develop- degree of confidence due to the high uncertainty ment projects. A sharper than expected slowdown in surrounding political and security developments. global growth could reduce global oil demand, result- However, if Libya manages to maintain or ramp up ing in reduced exports, government revenues, eco- oil production and exports compared to 2021, or at nomic growth, fiscal and current account balances, least avoid extended disruptions, it could benefit from and foreign reserves. Executive summary xi 1 CONFLICT SITUATION OVERVIEW A fter a decade mired in conflict, Libya was nor the legal and constitutional basis for the elections. able to turn—temporarily—a corner in As a result, political and security tensions and oil 2021. A ceasefire agreed upon in October production disruptions have escalated. In addition, 2020 persisted, and a unified interim government—the the eastern-based House of Representatives has Government of National Unity (GNU)—was formed in granted confidence to a new cabinet, the Government March 2021. The frequency of conflict events sharply of National Stability (GNS). In contrast, the GNU decreased (239 in 2021 compared to an average of considers that its mandate does not end until national 1,199 for 2014–2020), and fatalities dropped by 95 elections occur. As a result, Libya finds itself again with percent compared to the period between 2014 and two parallel governments in the East and West, with 2020 (115 in 2021 compared to an average of 2,364 negative implications for policy making, economic for 2014–2020) (Figure 1). The authorities initiated recovery, and security. Nevertheless, conflict events’ efforts to reunify competing public institutions in the frequency and intensity remain contained compared East and West, including the Central Bank of Libya. with the pre-2021 conflict period. Oil production recovered to 2019 levels (1.2 million Notwithstanding the recent tempering barrels per day—mb/d on average in 2021) following of conflict intensity, the Libyan economy has a 9-month-long blockade on oil export terminals been battered by the conflict. GDP growth in 2020. An exchange rate devaluation in January has experienced significant volatility owing to the 2021 largely removed the wide and growing wedge conflict and its impact on oil production and exports, between the black market and official rates. recording estimated high double-digit contractions The year 2022 has brought a return to and expansions in most conflict years. Volatility political division and rising risks of a backslide aside, Libya’s real GDP has sharply declined since into conflict, albeit with comparatively few conflict 2011, diverging significantly from the upward trend events and fatalities to date. Initially scheduled for countries in the Middle East and North Africa for December 2021, national elections have been region, as well as FCV countries and countries at a postponed, and there is no agreement on a new date similar level of income (Figure 3). Despite recovering 1 FIGURE 1 • Conflict Events and Fatalities FIGURE 2 • Population and Population Growth 1,750 6 8 1.8% 1,500 5 7 1.6% Fatalities, thousand Annual percentage growth rate 1,250 4 1.4% 6 1,000 Events Millions of people 3 1.2% 750 5 2 1.0% 500 4 1 0.8% 250 3 0 0 0.6% 2 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 0.4% 1 0.2% Violence against civilians Strategic developments 0 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Riots Protests Explosions/Remote violence Battles Fatalities (RHS) Population Population growth (RHS) Source: Armed Conflict Locations and Event Data. Source: World Development Indicators, MFMOD, and World Bank team estimates. Evolution of Real GDP Compared to FIGURE 3 •  FIGURE 4 • GDP Per Capita Benchmarks 140 180 160 120 140 Index (2010 = 100) 120 100 100 Index (2011 = 100) 80 80 60 40 60 20 0 40 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20 Middle East & North Africa Fragile and conflict affected situations 0 Upper middle income Libya 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 countries Source: World Development Indicators, MFMOD, and World Bank team estimates. Source: World Development Indicators, MFMOD, and World Bank team estimates. somewhat in 2021, real GDP for that year is estimated expansion (Figure 5). Despite the easing of the con- at about half of the pre-conflict GDP in 2010. GDP per flict situation in 2021 and the rebound in oil produc- capita in 2021 stood at about half of its value in 2010 tion, average production in 2021 remained 29 per- before the start of the conflict (Figure 4). cent below the pre-conflict level in 2010. According Both the hydrocarbon and non-hydrocar- to estimates by the Ministry of Planning, the value- bon sectors experienced a massive decline. The added of the non-hydrocarbon sector in 2019 was hydrocarbon sector, the mainstay of the economy, 13 percent lower than its pre-crisis level in 2010. This took a significant hit. Oil production and exports downturn in the non-hydrocarbon sector reflected dropped and became increasingly volatile due to the critical role of hydrocarbon revenues in financing blockades and conflict events. These interrupted government expenditures and supporting aggregate production and damaged oil production and export demand—hydrocarbon revenues comprised 81 per- infrastructure, poor maintenance, and limited invest- cent of government revenues over the past decade ments in oil exploration and production capacity (Figure 6). As hydrocarbon production and exports 2 LIBYA ECONOMIC MONITOR FIGURE 5 • Oil Production and Exports FIGURE 6 • Real GDP Growth (% change) 2.0 70 225 1.8 60 200 1.6 175 Barrel per day, million 1.4 50 150 US$ billion 1.2 40 125 1.0 100 Percent 0.8 30 75 0.6 20 50 0.4 25 0.2 10 0 0.0 0 –25 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 –50 –75 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Crude oil production (incl. lease condensate) (lhs) Hydrocarbon exports (rhs) Hydrocarbon Non-Hydrocarbon Real GDP Source: Organization of the Petroleum Exporting Countries (oil production) and Central Bank of Libya (hydrocarbon exports). Source: Libyan authorities and World Bank team estimates. Real GDP and Sectoral Growth Rates FIGURE 7 •  FIGURE 8 • Sectoral Contribution to Annual Real (percent change, annual) GDP Growth (percent) 180 100 160 140 80 120 60 100 Percent change 80 40 Percent 60 20 40 20 0 0 –20 –20 –40 –40 –60 –80 –60 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Agriculture Industry Services Real GDP Agriculture Industry Services Real GDP Source: Ministry of Planning, World Bank staff calculations. Source: Ministry of Planning, World Bank staff calculations. Note: Industry sector includes mining and quarring activities such as hydrocarbon Note: Industry sector includes mining and quarring activities such as hydrocarbon production. production. fell, so did government revenues and, in turn, govern- pre-conflict period reported that they had halted their ment expenditures. agricultural production activity. The conflict negatively Estimates by the Ministry of Planning reveal impacted the service sector, registering a fast-tracking the impact of the conflict on the agriculture and decline of an estimated 27 percent during the 2015– services sectors. The agriculture sector experienced 2019 period, recording an estimated value-added of 27 volatile growth during the conflict, with output percent lower in 2019 than in 2015 (10 percent lower continuing to grow during 2011–2014, declining by in 2019 than in 2010). The poor performance of the 18 percent on average over the period 2015–2017, service sector was mainly driven by a sharp decrease characterized by a high intensity of conflict, and then in gross value added of trade, repair, accommodation, starting to recover. According to the REACH initiative’s food, financial and insurance activities, public Multi-Sectoral Needs Assessment survey in August- administration, and defense sectors (Figures 7 and 8). September 2021, 79 percent of households that Deteriorating security and economic condi- used to engage in agricultural activities during the tions negatively affected the welfare of Libyans. Conflict Situation Overview 3 FIGURE 9 • IDP and Migrant Individuals Libya and Comparators’ Human FIGURE 10 •  Development Index 800,000 700,000 0.95 600,000 0.90 500,000 0.85 400,000 0.80 300,000 0.75 200,000 0.70 100,000 0.65 0 01/28/16 01/28/17 01/28/18 01/28/19 01/28/20 01/28/21 01/28/22 0.60 IDP Migrants 0.55 0.50 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: International Organization for Migration (IOM), Displacement Tracking Matrix Notes: Between start-February 2018 and the end August 2019, the IOM ran only one survey in Libya in the context of updating its displacement tracking matrix; the U.N. Libya Arab states Very high HD countries Migration Agency defines a migrant as any person who is moving or has moved across High HD Medium HD FCV countries an international border or within a State away from their habitual place of residence, countries countries regardless of (1) the person’s legal status; (2) whether the movement is voluntary or involuntary; (3) what the causes for the movement are; or (4) what the length of stay is. Source: United Nations Development Programme. The conflict drove Libyans to leave their homes. Libya’s level of human development, as While data pre-2016 is not available, figures from the measured by the Human Development Index International Organization for Migration reveal that (HDI), has taken a hit throughout the conflict. The during the 2016–2021 period, the total number of HDI is a composite statistic developed by the United internally displaced people (IDPs) peaked at around Nations Development Programme to provide an over- 425,000 in June 2016 before progressively declin- all indication of the quality of life and opportunity, ing to 168,000 in January 2022 (Figure 9). Alongside incorporating human health (life expectancy), educa- migrants residing in Libya (approximately 635,000 in tion level, and per capita income.5 According to the early 2022), IDPs were especially vulnerable. Data HDI, the Libyan war has resulted in significant devel- on the incidence of poverty is not available in recent opment losses; pre-war Libya’s HDI stood at 0.798 in years due to the difficulty of data collection during 2010, making it more than halfway between very high the conflict. However, 9.1 percent of the population and high development countries; at its lowest point in of twenty assessed municipalities were multidimen- 2016, it stood at 0.687 (Figure 10). Nonetheless, this sionally poor, with IDPs suffering from significantly higher multi-dimenstional poverty rates (25.9 percent) (UNFPA, 2018). The main factors contributing to 3 The Living Standard Gap score identifies the proportion such poverty were unemployment, dependency, and of households that cannot meet their basic needs in the assessed sectors, as well as the severity of these needs. chronic diseases. Meanwhile, the 2019 Multi-Sectoral Sectors covered are livelihood, food security, shelter and Needs Assessment found that 61 percent of house- non-food items, WASH, health, education and protection holds (490,000 households, 2.5 million individuals) (REACH, 2019). experienced a living standard3 and capacity gap.4 4 The Capacity Gap score identifies households that may In other words, 61 percent of households could not not currently have one or more living standard gaps, but meet their basic needs in one or more sectors and/ which are maintaining their living standards by relying on negative coping mechanisms, and which may eventually or relied on negative, unsustainable coping mecha- develop living standard gaps once their available coping nisms to meet these needs. In addition, 53 percent of mechanisms have been exhausted. (REACH, 2019) Libyan households in the selected provinces had a 5 An HDI level lower than 0.55 is considered low and a severe to the extreme capacity gap. level higher than 0.8 is considered very high. 4 LIBYA ECONOMIC MONITOR HDI rank remained higher than average for FCV and Health Organization’s (WHO) most recent Service medium human development countries. The HDI re- Availability and Assessment report for Libya in 2017 covered somewhat post-2016, bringing it closer to, yet revealed that 20 percent of the country’s 1,355 still below, that of high human development countries. primary healthcare (PHC) facilities had closed due Worryingly, Libya’s protracted conflict led to disrepair, inaccessibility due to conflict, physical to a decrease in the expected years of schooling. damage, or occupation by other parties. Only one- Expected years of schooling dropped from 14 to 13 third of PHC facilities were fully functional. Only 16 years during 2010–19, from one year below very high percent of PHCs and 44 percent of hospitals had development countries’ average to one year below high basic readiness to deliver essential medicines. Only development countries’ average. However, mean years about 40 percent of PHC facilities offered basic of schooling rose slightly over the same period, indicat- maternal and childcare, and only about half were ing that a child born in Libya today is likely to have fewer diagnosed and treated for diabetes (51 percent), years of schooling than those born in 2010. In contrast, cardiovascular diseases (48 percent), and chronic expected years of schooling rose over this same period respiratory diseases (45 percent). Basic infrastructure across Libya’s comparators, including FCV countries. (electricity, water, sewerage, and telecommunications) This deterioration of education outcomes is is not consistently available for health facilities. Severe partly driven by reduced availability of functional shortages in medicines persist. While healthcare schools, household economic difficulties, and worker availability pre-conflict was on par with MENA poor policy coordination. According to UN OCHA, countries, Libya now faces shortages in medical 245 schools (around 5 percent of total schools in professionals (bachelor-degree nurses, family the country) were destroyed or damaged due to practitioners, mental health practitioners, etc.) and a the armed conflict in 2021, down from 507 in 2016. surplus of many others, with negative implications for Another 23 schools served as temporary shelters the quality of care. Access to healthcare services is for IDPs compared to 51 in 2016. Despite this unequal across regions and urban-rural areas, and improvement over the past five years, the reduced individuals with differing employment and migrant availability of schools due to destruction, damage, statuses (Kak et al. forthcoming, 2022). The COVID-19 in addition to constraints to school access due to pandemic further overwhelmed the health system. movement restrictions and the presence of mines Water infrastructure has suffered signifi- and unidentified explosive objects has led to school cant damage and destruction, leading to limited overcrowding, thereby compromising the quality of production and service capacity, widespread wa- the learning environment. Schools in urban areas have ter shortages, and increased unit operating costs. substantial student populations (up to 2,000 students Constrained government budgets during the conflict in some primary schools). This has necessitated years also translated into a considerable reduction the adoption of a shift system to accommodate all in the budget allocation for critical inputs, including students. The degradation of livelihood conditions chemicals and energy, which led to diminished servic- of both Libyans and migrants has also affected their es and poor infrastructure maintenance. As a result, children’s access to education services, as many were by 2019, only 64 percent of the population had ac- unable to afford school fees or needed their children cess to safe drinking water compared to 95 percent to work to contribute to the household income in 2011. Furthermore, water supply services dropped (REACH, 2022). Political division and the creation of from 24 hours a day to 8 hours or less per day in 2020 a parallel Ministry of Education in the East have led across all main urban areas. In addition, most waste- to a lack of coordination and timeliness in the design water treatment plants are out-of-order, with severe and implementation of sector policies, programs, and implications for public health. A rough estimate of the projects (Espeut et al., forthcoming 2022). financial losses incurred by the sector between 2012 The armed conflict placed extreme stress and 2019 due to the conflict is at least US$ 2.8 billion, on an already vulnerable health sector. The World including 47 percent incurred by urban dwellers due Conflict Situation Overview 5 to drinking water rationing, 21 percent incurred by the FIGURE 11 • Worldwide Governance Indicators Man-Made River Project because of lack of payment (percentile rank) for delivered water and higher unit production costs, 50 Percentile Rank (100 = highest) 45 15 percent due to infrastructure damage and destruc- 40 tion, and 12 percent incurred by irrigation farmers 35 30 due to the cost of operating local pumps (Rammel 25 20 and Requena, forthcoming 2022). 15 10 The conflict caused severe damage to the 5 0 electricity sector’s infrastructure and disrupted 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 the electricity supply. Economic shocks associated with the conflict and the COVID-19 pandemic also Voice and accountability Political stability and violence Government effectiveness Regulatory quality affected supply. Surveyed Libyan and migrant Rule of law Control of corruption households who access electricity mainly from the Source: Worldwide Governance Indicators. general grid reported 7.3 and 5.3 hours of power blackouts per day, respectively, during the week preceding data collection6 (REACH initiative, 2022a). Libya’s dismal governance performance de- spring 2022 of two rival governments in the East and teriorated further throughout the conflict. Libya’s West increases the risk of a roll-back of recent prog- historical pre-conflict performance on key governance ress at reunification by some state institutions, includ- indicators left much desired. For example, its percen- ing the Central Bank. tile ranking on five of six indices published under the Competition and conflict between elites in Worldwide Governance Indicators (voice and account- the East and West have resulted in the develop- ability, government effectiveness, the rule of law, reg- ment of parallel state institutions and a struggle ulatory quality, and control of corruption) was below over the control of governing bodies. This has al- 20 (100 being the highest) in 2010. In addition, the lowed a degree of autonomy for leading state insti- country was at the 48th percentile in the political stabil- tutions, including the Central Bank of Libya (CBL) ity and violence index in 2010. Unsurprisingly, Libya’s and the National Oil Company (NOC)—and a con- lackluster rankings plummeted further on five of the tinuing lack of oversight of others—Libya Investment six indices since the start of the conflict, the exception Authority (LIA) and the Organization for Development being the index for voice and accountability, which ex- of Administrative Centers (ODAC). perienced a slight increase (Figure 11). The state lacks a monopoly on the use of While poor state legitimacy pre-dated the force, resulting in high levels of insecurity and conflict, this situation has been further exacer- instability. Since 2011, Libya has experienced a bated during the conflict period. Libya had a lega- proliferation of armed groups and competition by cy of weak institutions and social contracts, systemic political groups seeking support from these groups. marginalization of specific communities, and corrup- In addition, criminal networks and terrorist groups tion, among others, before the start of the conflict. For are active in the country, and primarily open borders much of the past decade, the Libyan state has oper- have allowed a surge of illicit and illegal trade to ated in the presence of two rival governments in the neighboring countries and Europe. East and West, with adverse implications for state le- gitimacy and the quality and efficacy of policy making and public service delivery. Political institutions today lack legitimacy without a national legal and constitu- 6 Quantitative data collection for the MSNA took place tional framework for national elections. The return in between June 14, 2021 and July 31, 2021. 6 LIBYA ECONOMIC MONITOR 2 RECENT ECONOMIC DEVELOPMENTS Volatile Oil Production and, in Turn, World Bank estimates of economic activity Economic Activity in 2021 reveal a significant growth rebound. This primarily resulted from the acceleration of oil GDP data recently published by the authori- production (average of 1.2 million barrels per day ties reveal economic growth trends over much (mb/d) compared to 0.4 mb/d in 2020) following the of the conflict period that is roughly similar to lifting of the oil export blockade that lasted for much World Bank estimates. Libyan authorities have re- of the year in 2020 (Figures 5 and 6). cently published their estimates of national GDP for However, oil production and exports, the the period between 2006 and 2019. This included primary drivers of economic activity, have been publishing data in detail for the first time during volatile since the end-2021 due to weather-in- much of the conflict (2014–2019). The authorities’ duced port closures, infrastructure maintenance significant efforts to construct this time series, de- issues, and shutdowns by armed groups. After a spite the challenges with data collection during the decline in oil production in December 2021 as the conflict period, will enhance the abilities of policy- postponement of national elections was accompa- makers, development partners, and researchers nied by heightened political and security uncertainty, to understand better the evolution of the Libyan production dipped further in January. It averaged economy over the past two decades and to inform 1.08 million barrels/day (mbd) (compared to a 2021 policy for the coming years. This data reveals real average of 1.21 mbd) due to an ongoing blockade growth trends roughly in line (in terms of direction- of export terminals by the Petroleum Facilities Guard ality and orders of magnitude) with the economic and weather-induced port closures, and poor main- growth estimates that the World Bank had been tenance of oil tanks damaged by armed conflict. producing. However, given the high degree of un- Following the formation of the Government of National certainty around macroeconomic estimates during Stability (GNS), further protests and blockades dealt a the conflict period, estimates from various sources blow to oil production and resulted in a decline in oil are expected to vary. production and revenues. As a result, oil production 7 BOX 1: THE MEDIAN COST OF THE MINIMUM EXPENDITURE BASKET (MEB) AS AN ALTERNATIVE MEASURE OF INFLATION IN LIBYA The median cost of the MEB is measured by the REACH initiative and serves as a source of data on prices in Libya. The median cost of MEB calculation and monitoring is part of the Joint Market Monitoring Initiative (JMMI) created by the Libya Cash & Market Working Group (CMWG) in June 2017. The JMMI aims to inform cash-based interventions and better understand market dynamics in Libya. The initiative is led by REACH and supported by the CMWG members. It is funded by the Office of U.S. Foreign Disaster Assistance (OFDA) and the United Nations High Commissioner for Refugees (UNHCR). The MEB is the minimum culturally adjusted basket required to support a Libyan household for a month on a regular or seasonal basis. Its median cost is the monetary threshold for what is needed to cover these essential needs (U.N. World Food Programme, Minimum Expenditure Baskets – Guidance Note, 2020). For Libya, the basket includes 18 food items, five non-food items, and cooking fuel, the quantities of which reflect the needs of a household of 5.2 persons. Data on the median cost of the MEB is collected monthly and is available starting January 2018. The methodology is based on purposive monthly sampling targeting 658 shops in 34 critical urban areas across Libya. Data collection targets urban areas throughout Libya to ensure coverage of markets that serve as commercial hubs for surrounding regions. Markets and shops that are included in the sample are chosen to ensure that (1) they are large enough to sell most assessed items, (2) they are located in different areas within the assessed city or municipality, and (3) their prices are a good indicator of the general price levels in the assessed regions. Price data are collected from the same shops whenever possible each month to ensure comparability across months. In each assessed market, at least four prices per item are collected from different shops to ensure the quality and consistency of collected data. Enumerators record the cheapest available price for each item, but do not require a specific brand, as brand availability may vary. The MEB’s cost calculation is based on “location median” to minimize the effects of outliers and differing amounts of data among assessed locations. At least four lowest prices per item are collected in each assessed location. Within each assessed location, the REACH initiative first calculates the median prices of all assessed items, then calculates the median cost of the MEB by multiplying the median price of each item in the MEB by the quantity identified to respond to the basic needs of a Libyan household. The median cost of the MEB has important limitations, and thus MEB inflation rates must be interpreted with caution. Prices indicate the time frame they were collected and the general price levels in each assessed location. Data is collected on the lowest available price for each item and does not capture prices of middle-market and upmarket goods. Consequently, MEB inflation rates are not necessarily representative at the level of provinces or regions. Even at the city level, price data should be interpreted with caution, particularly in larger cities with substantial variation in neighborhoods’ socioeconomic groups. during the first quarter of 2022 was around 4.4 per- initiative measures the MEB monthly and across cent lower than the 2021 average and reportedly de- most local markets in the country. The MEB inflation clined further during April and May 2022. rate suffers from its limitations, including the narrow scope of products in the basket, questions of national Escalating Inflation representativeness of the rate, and underestimation due to measuring the lowest available price for each Both available sources of data on prices suffer product in the basket. from significant limitations. The two key sources of Despite their limitations, these data sources data on prices in Libya are the official CPI inflation offer a consistent story of increasing inflationary rate and the inflation of the Minimum Expenditure pressures during 2021 and through the first quar- Basket (MEB) measured by the REACH initiative ter of 2022. The official inflation rate recorded an esti- (see Box 1). Official CPI inflation figures are likely a mated 2.8 percent in 2021 compared to 1.4 percent in gross underestimate of the true inflation rate as they 2020 and –2.2 percent in 2019. In 2022, inflation pro- relied during much of the conflict period on data gressively increased, reaching 5.7 percent in March collected primarily from Tripoli, given the challenges 2022 compared to the same month in 2021 (Figure 12). associated with data collection across the country in As previously stated, these official rates are likely a a complex political and security landscape. The MEB gross underestimate. On the other hand, the MEB in- is the minimum culturally adjusted items required to flation rate reached the double digits year-on-year in support a Libyan household for a month. The REACH early 2021 following the devaluation of the exchange 8 LIBYA ECONOMIC MONITOR Overall Inflation Rate & Food and FIGURE 12 •  FIGURE 13 • MEB and Food-MEB Inflation Rate Drink Inflation Rate (% change, y-o-y) (% change, y-o-y) 50% 60% 40% 50% 40% 30% Price, y-o-y change, % 30% 20% 20% 10% 10% 0% 0% –10% –20% –10% Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 –20% Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Inflation rate Food beverages & tobacco Median cost of MEB MEB-food portion Source: Bureau of Statistics and Census (BSC), World Bank staff calculations. Source: Bureau of Statistics and Census (BSC), World Bank staff calculations. FIGURE 14 • Contribution to Inflation Rate by FIGURE 15 • Food-MEB Inflation Rate by Region Spending Category (% change, y-o-y) 6% 50% 5% 40% 4% Price, y-o-y change, % 30% 3% 2% 20% 1% 10% 0 0% Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 –10% –20% Othersa Transportation Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Housing, water, electricity, Food & drinks gas, other types of fuels Inflation rate Libya East South West Source: Bureau of Statistics and Census (BSC), World Bank staff calculations. Source: REACH Initiative and World Bank staff calculations. a Others encompasses categories of goods and services such as clothes and shoes, house equipments and furniture, telecommunicaion, culture and entertainment, education, health, hotels and restaurants and other goods and services inflation rate since 2021. This includes the prices of food and drinks, housing, electricity, water, gas rate but stabilized by the middle of 2021 (Figure 13). and other fuels, and transportation (Figure 14). These During the year’s second half, MEB inflation escalated prices rose in 2021 and accelerated during the year’s again, averaging 10.5 percent year on year. This infla- second half and through the first quarter of 2022. tionary trend accelerated further in 2022, particularly Supply chain disruptions due to the civil conflict and following the start of the Russia-Ukraine conflict and COVID-19 containment measures contributed to food averaged 21.1 percent year on year. In May 2022, the and fuel price increases. In addition, damaged water MEB was 32.2 percent higher than in May 2021 and and electricity infrastructure due to the conflict forced 49.5 percent higher than in March 2020 at the start of Libyans to turn to costly alternative sources of water the COVID-19 pandemic. MEB inflation over the past and electricity generation, which also contributed to year was especially pronounced in the West. price increases. Prices of essential goods and services are The Russia-Ukraine crisis has contributed to the main contributors to Libya’s higher official inflationary pressures in the past months through Recent Economic Developments 9 its impact on food prices (see Annex). Libya relies conducted by the World Food Program (WFP) in significantly on wheat and cereal imports from Russia August-September 2021, more than half of surveyed and Ukraine (54 percent of wheat imports, 65 percent households reported having experienced shocks in of barley imports, and 72 percent of maize or corn the last 12 months, with 38 percent reporting reduced imports).7 In the wake of the Russia-Ukraine crisis, ability to produce or purchase food. For households food and drink prices rose significantly, registering that experienced shocks, price fluctuations and 5.5 percent inflation year-on-year in March 2022, increases (37 percent) rank highest among the according to official inflation data from the BSC. After types of shock experienced. Since the conduct of declining during the first two months of the year, the this survey, inflation has increased significantly, inflation rate of the food portion of the MEB shot up with further adverse impacts on the population’s to 40.6 percent year-on-year in April 2022 before purchasing power and wellbeing. declining somewhat to 31 percent in May 2022. The median cost of the food portion of the MEB in May Strong 2021 Fiscal Surplus and 2022 stood at 14 percent higher than the pre-crisis Uncertain 2022 Spending and level in February 2022 (Figure 13). Revenue Arrangements The impact of the crisis on food prices seems to have affected the country’s West signifi- The fiscal balance witnessed a massive reversal cantly more than other regions. The median cost from a 64.1 percent of GDP deficit in 2020 to a of the food portion of the MEB in the West remained 10.6 percent of GDP surplus in 2021 (Figure 16). 22 percent higher in May 2022 than in February 2022 This resulted from the jump in oil production and (compared to 9 percent higher in the East and 4 per- prices and the exchange rate devaluation (much of cent higher in the South) (Figure 4). Price increases the spending (particularly wages) was denominated have reportedly been fueled by higher demand in the in LYD, whereas 98 percent of revenues in 2021 were West and hoarding of basic staples due to concerns sourced from hydrocarbons denominated in US$). As about potential shortages. a result, government spending in LYD increased by The authorities are implementing measures 87 percent in 2021 with rises across all major budget to ensure food availability around the country and categories or chapters (Figure 17); however, given limit food price increases. The Ministry of Economy the 70 percent depreciation of the exchange rate in and Trade in the Government of National Unity January 2021, this represented a spending drop of 44 (GNU) is preparing a food security strategy to help percent in USD equivalent. the country cope with the food crisis. The authorities The GNU continues to spend on essential requested mill owners, agri-food businesses and line items without an approved 2022 budget. The commodity importers to create a three-month GNU has not submitted a draft budget to the HoR and strategic stock of staple foods. The GNU tightened its is unlikely to do so in light of the political divisions price control measures by increasing the frequency and the HoR’s backing of the GNS. In budgeting its of control visits to significant markets in Libya. It spending, the GNU has been following the 1/12 rule. ordered and imposed a total ban on fish exports. To The GNU has been issuing authorizations through the support local markets, the authorities have also been Ministry of Finance to the Central Bank of Libya to working with the governments of Turkey, Russia, and disburse payments for its expenditures, the legal basis other countries to import grains and flour and with of which is uncertain in the absence of an approved Tunisian counterparts to increase the bilateral trade budget. The CBL has been disbursing funds to finance of drugs and food. In its draft budget, the GNS, a rival essential spending, including wages and salaries of government to GNU, reintroduced food subsidies civil servants, social transfers, subsidies, etc. worth LYD 900 million. Price inflation has had a significant impact on Libyan households. According to a phone survey 7 Average over 2016–20. 10 LIBYA ECONOMIC MONITOR Budget Balance (share of GDP, FIGURE 16 •  Government Revenues and FIGURE 17 •  LYD billions) Expenditures 25 120 10.6 100 1.7 0 80 60 LYD billion –7.0 40 –25 20 % of GDP –34.5 0 –50 –20 –40 –64.1 2015 2016 2017 2018 2019 2020 2021 –75 –80.9 –81.2 Budget balance Revenues Wages and salaries Capital expenditure –100 Subsidies and transfers 2015 2016 2017 2018 2019 2020 2021 Source: Libyan authorities, World Bank staff calculations. Source: Libyan authorities, World Bank staff calculations. During the first five months of 2022, the automatic transfer of oil export revenues from NOC’s GNU ran a fiscal surplus of LYD 12.1 billion. Data Libyan Foreign Bank account to the government’s published by the CBL reveals that total revenues general revenue account at CBL. However, in May amounted to LYD 43.2 billion, with hydrocarbon 2022, the HoR issued a decision requesting the revenues constituting 90 percent. This substantial NOC to freeze oil revenues at the Libyan Foreign revenue performance results from high oil production Bank escrow account until a transparent revenue and exports and elevated international oil prices. management mechanism is agreed upon. Wages and salaries, and subsidies capture 53 and Libya’s debt stock is large but manageable 28 percent of total spending, respectively, whereas as long as hydrocarbon production and exports capital spending was not undertaken. If the GNU persist. At the end of 2021, the public debt stock continued spending at this pace for the rest of the was estimated at LYD 156.3 billion, representing 83 year, wages and salaries would record a 19 percent percent of GDP (Figure 18). Public debt is domestic nominal increase over 2021 spending. and denominated in LYD, whereas government The HoR, meanwhile, approved on June 17, 2022, the draft national budget for FY2022 presented by the GNS. The GNS projects that FIGURE 18 • Public Debt Stock in Libya total spending (excluding National Oil Corporation) will be 4.5 percent higher in 2022 than in 2021. In 200 500 contrast, total revenues are forecasted to record a 400 level 10 percent lower than during the previous year, 150 LYD billion likely due to production and export interruptions and 300 100 despite soaring international oil prices. Accordingly, 200 the GNS is projecting a positive overall fiscal balance 50 of LYD 5.4 billion by the end of 2022. 100 The issue of transparency in oil revenue 0 0 management has come to the fore as hydrocarbon 2015 2016 2017 2018 2019 2020 2021 revenues soar and competing governments aim Public debt stock (LHS) Public debt a s a share of GDP (RHS) to access them to finance spending. Earlier in the year, the GNU had agreed with the NOC to ensure the Source: CBL, World Bank staff calculations. Recent Economic Developments 11 FIGURE 19 • Trade in Goods (in US$ Billion) Official and Parallel Exchange Rates FIGURE 20 •  50 7 45 40 6 35 5 30 Exchange Rate US$ billion 25 4 (parallel market) LYD/US$ 20 3 15 10 2 Exchange Rate (official) 5 0 1 –5 2016 2017 2018 2019 2020 2021 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Trade balance Exports (FOB) Imports (CIF) 2020 2021 2022 Source: Direction of Trade Statistics – IMF. Source: CBL. revenues are primarily sourced from oil exports USD. While more recent data on net international denominated in US$. It is expected that the ease of reserves are not readily available, estimates reveal that servicing state liabilities has increased since 2021 Libya’s reserve position remains very comfortable, with due to the increase in hydrocarbon revenues, and the reserves in 2021 at 46 months of imports and 3.7 times depreciation of the official exchange rate depreciated broad money (M2), thanks to the steady inflow of U.S. by almost 70 percent in early 2021. The GNS’s dollars in the form of hydrocarbon export revenues. In budget for 2022 reveals plans to repay LYD 12 billion addition, the government of Libya is actively discussing of public debt 2022. with the U.N. sanction committee the unfreezing of the Libya Investment Authority’s (LIA – sovereign wealth Rebound in External Balances and fund) frozen assets. Libya has US$ 53.6 billion in frozen Persistence of Liquidity Crisis overseas assets, of which US$ 33.5 billion are in cash, and US$ 20.1 billion are in investments. Libya’s trade balance and current account bal- While the official exchange rate has re- ance rebounded in 2021 and through early 2022, mained relatively stable since the 2021 devalu- thanks to the recovery of oil exports and receipts. ation, it has experienced some depreciation, In 2021, Libya’s exports more than tripled as global oil particularly over the past 6 months. Since the de- prices soared and oil export volumes recovered fol- valuation of the exchange rate in January 2021, the lowing the removal of the 2020 blockade on oil export wedge between the official and black-market rates has terminals (Figure 19). Consequently, despite doubling narrowed significantly. In December 2020, the black- goods imports compared to 2020, the trade balance market rate was 4.3 times the official exchange rate. is estimated to have recorded a surplus of 21.7 per- It dropped to 1.06 times the official rate by May 2022 cent of GDP (compared to a deficit of 14.7 percent in (Figure 20). The official rate remained relatively stable 2020). Similarly, the current account reversed course, throughout 2021, depreciating 3.2 percent from the from a deficit of 15.3 percent of GDP in 2020 to a sur- new official exchange rate of LYD 1.00 = SDR 0.156, plus of 21.1 percent in 2021. Data on trade in goods which became effective on January 3, 2021 (with for January and February 2022 reveal a trade surplus the equivalent rate to the U.S. dollar at LYD 4.458 = of US$ 5.3 billion. US$1.00 in January 2021). Over the first months of Net international reserves remain at a 2022, the pace of this depreciation trend has acceler- comfortable level. In end-September 2020, the IMF ated, with the official exchange rate reaching 4.789 estimated net foreign reserves at around 75 billion LYD per US$ in May. This represents a 7.4 percent 12 LIBYA ECONOMIC MONITOR FIGURE 21 • Money Supply FIGURE 22 • Broad Money as a Share of GDP (annual change in percent) and Currency Outside of Banks as a Share of Broad Money 250 (in percent) 200 150 35 375 100 34 325 50 33 32 275 0 31 225 –50 30 –100 175 29 –150 28 125 –200 27 –250 75 26 2016 2017 2018 2019 2020 2021 25 25 2016 2017 2018 2019 2020 2021 Net foreign assets Net claims on govt Net claims on other sectors Other items net Cash outside of banks/M2, in percent (Ihs) Money supply M2/GDP, in percent (rhs) Source: Libyan authorities, World Bank staff calculations. Source: Libyan authorities, World Bank staff calculations. devaluation since January 2021 (4.6 percent since percent drop in net other items, and a triple-digit end-2021). This devaluation trend may be driven, at percent increase in net foreign assets (Figure 21). least in part, by the increasing political and security These massive shifts were likely primarily driven by tensions in the country and the associated oil produc- the exchange rate depreciation in January 2021 and tion and oil export volatility. the rebound in oil export receipts, which led to budget The liquidity crisis persists; after a rapid and current account surpluses. Demand deposits expansion of the money supply in 2020, broad and currency in circulation outside the banks shrunk money shrunk by 20 percent in 2021, recording a 7.3 by a similar rate to that of broad money (–21 percent percent lower than in 2019 (Figure 11). Underlying and –20 percent, respectively), which led the ratio of this 20 percent drop is a double-digit percentage currency in circulation to broad money to hold steady point drop in net claims on government, a triple-digit at 31.6 percent (Figure 22). Recent Economic Developments 13 3 SOCIAL DEVELOPMENTS Improving the Humanitarian and tions on movement. Migrants continue to face pro- Epidemiological Situation tection risks and issues with access to critical ser- vices and shelter. Humanitarian conditions in Libya improved Libya has reported a marked decline somewhat over 2021, but vulnerabilities per- in case incidence and deaths linked to the sist . The signing of the ceasefire agreement in late COVID-19 pandemic since March 2022, while 2020 and the formation of the GNU laid the ground overall vaccination coverage remains low. The for increased stability and general improvements average number of new cases dropped to 5 per day, in access and mobility across the country, there- whereas average deaths almost reached zero per day by reducing the number of people in need of hu- during April and May 2022, their lowest levels since manitarian assistance. According to the U.N. Of- the beginning of the pandemic. As of May 31, 2022, fice for the Coordination of Humanitarian Affairs total cases and deaths reached 50,2016 and 6,430, (OCHA), the number of people needing targeted respectively (Figure 23). In addition, the number of humanitarian aid is projected to record 803,000 in people vaccinated reached 32.3 percent, whereas 2022, 36 percent lower than the 2021 figure. This only 17 percent were fully vaccinated by the end of represents 9.8 percent of the population, of which May 2022, compared to 63 percent and 53 percent in 66 percent are Libyans, 29 percent are migrants, Morocco and Tunisia, respectively (Figure 24). and 5 percent are refugees. Of these individuals, 24 percent are women, and 36 percent are chil- dren. According to the MSNA from the REACH 8 Results of the REACH Initiative’s Multi-Sector Needs initiative, priority needs include access to cash, Assessment in Libya in 2021 (MSNA) should be medical care and food.8 Major factors determin- interpreted as indicative. Due to challenges associated ing vulnerabilities of the Libyan population include with the COVID-19 pandemic and the security context, the a lack of access to essential services and restric- survey sample is non-random and non-representative. 15 FIGURE 23 • COVID-19 Cases and Deaths FIGURE 24 • Regional COVID-19 Vaccination Rate 7,000 600 70 6,000 People fully vaccinated per hundred 500 60 5,000 Thousand Cases 400 50 4,000 Cases 300 40 3,000 200 2,000 30 1,000 100 20 0 0 10 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 0 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22 New cases New cases (smoothed) Total deaths Total cases Algeria Libya Morocco Tunisia Source: Our World in Data. Source: Our World in Data. Challenges in Meeting Essential Food be food insecure and in need of assistance during and Non-Food Needs the first five months of 2022. Comparing Libya to other oil-intensive countries experiencing a medium- Loss of jobs and sources of income due to the intensity fragile and conflict situation reveals that food conflict, economic downturn and COVID-19 insecurity is worse than in Iraq and Nigeria but better containment measures have forced households than in its neighbor Chad (Figure 25). A WFP phone to adopt coping strategies, which are negative in survey conducted in August-September 2021 showed most cases, to meet their basic needs. According that 8 percent of Libyan households had inadequate to the REACH initiative, 63 percent and 49 percent food consumption. Data from the REACH initiative’s of Libyans and non-Libyans surveyed in mid-2021, MSNA conducted during the summer of 2021 reveals respectively, reported having used or exhausted that 13 percent of Libyan households faced food livelihood coping strategies classified as crisis or insecurity, with assessed households in the South emergency strategies, thereby hindering their capacity being the most exposed (27 percent). Meanwhile, to respond to potential future shocks. Libyans’ most 22 percent of internally displaced and returnee widespread coping strategies included taking on an households experienced food insecurity, compared additional job (44% of households), reducing health to 11 percent of non-displaced households and 17 expenses and selling productive household assets. percent of assessed migrant households. These Different coping strategies frequently employed figures are indicative but might not be nationally by migrants and refugees included taking on representative due to sampling challenges. Food additional working hours, spending savings, reducing insecurity is reportedly driven primarily by the inability expenditures on essential non-food items, borrowing, to cover essential expenses financially. Over a quarter begging for money, or doing illegal work. However, it of assessed households reported trouble meeting is necessary to note that these findings are indicative basic food needs the month before the interview and might not be nationally representative. due to unaffordability.9 Key informant interviews The COVID-19 pandemic and the Russia- conducted by REACH during October and November Ukraine crisis have exacerbated the food security 2021 found that high food prices and low income are crisis for a population already grappling with conflict and an associated economic downturn. 9 Results of the MSNA are indicative and cannot confidently According to OCHA, more than 511,000 people be considered representative of the population, due to (accounting for 6.2 percent of the total population, the sampling challenges associated with data collection including migrants and refugees) were estimated to by phone due to COVID-19 contingency measures. 16 LIBYA ECONOMIC MONITOR People in Need of Emergency FIGURE 25 •  People in Need of Essential Primary FIGURE 26 •  Humanitarian Food Assistance as a Healthcare as a Share of Total Share of Total Population Population 80 50 70 45 40 60 35 50 30 Percent Percent 40 25 30 20 15 20 10 10 5 0 0 Libya Iraq Nigeria South Sudan Chad Libya Iraq Nigeria South Sudan Chad Source: OCHA, Humanitarian Needs Overview – Country Reports 2022. Source: OCHA, Humanitarian Needs Overview – Country Reports 2022. Note: Libya is benchmarked against oil-intensive/exporter countries (IMF Note: Libya is benchmarked against oil intensive/exporters (IMF classification) that are classification) that are experiencing fragile and conflict situations with medium- experiencing a fragile and conflict situation with medium-intensity conflict (World Bank intensity conflict (World Bank classification in 2022). classification in 2022). Libyans’ main drivers of food security needs. While including migrants and refugees, would lack consistent more recent data on food security is not available, the access to primary and secondary healthcare services situation has likely taken a turn for the worse since in 2022. Libya is performing better than South Sudan the start of the Russia-Ukraine crisis, which resulted and neighboring Chad while lagging Iraq and Nigeria in a further escalation in food prices, particularly the (Figure 26). However, the lack of sufficient public prices of basic food staples (see Box 2). funding impacted health facilities’ ability to remain Libyans and non-Libyans adopted one or operational. The REACH initiative found that 56 more negative food-based coping mechanisms percent of households that needed healthcare in the to maintain some level of food security. Relying three months before data collection could not access on less preferred and less expensive foods, reducing it due to poor quality of health services or lack of the number of meals eaten in a day and limiting food medicines at the health facility, in addition to the high portion size for all household members at mealtimes cost of health services. For non-Libyans, among the 18 were the primary coping mechanisms cited by both percent who needed healthcare, the main barriers to Libyans and non-Libyans. The reduced coping accessing health services include security concerns strategies index was low for more than 85 percent of to travel to and at the health facility, lack of medicines, interviewed households in the summer of 2021 but is overcrowding and financial affordability. likely to have worsened throughout 2022 to date. National shortages of vaccines, essential medicines, and mental health services are alarm- ing. Libya faces a shortage of general vaccines, in- Limited Access to Basic Public cluding measles, Mumps, Rubella and Polio, which Services raises the risk of severe outbreaks of vaccine-pre- ventable diseases. The scarcity of essential medi- Access and quality of healthcare services are cations for HIV, acute diarrhea and dysentery, and challenging following consecutive waves of the Leishmaniasis risk the effective treatment and con- COVID-19 pandemic and a decade of conflict. tainment of the spread of these diseases. Meanwhile, The United Nations Office for the Coordination of access to critical mental health services in a country Humanitarian Affairs (OCHA) projected that over experiencing an ongoing conflict and pandemic is 800,000 people, or 9.7 percent of the total population, limited, especially in the South. Social developments 17 The COVID-19 pandemic and the deteriora- temporary shutdown of several water stations. As per tion of livelihood conditions negatively affected the REACH initiative, surveyed Libyan and non-Libyan Libyans’ and non Libyans’ access to education households relied on alternative water sources such services. As reported by REACH, for 11 and 35 per- as bottled water, protected wells and taps accessible cent of Libyan and non-Libyans households with at to the public to meet their daily needs. According to least one child not enrolled in school, respectively, OCHA estimates, over 380,000 people 4.6 percent of the lack of means for school fees, transport, materi- the total population) would need access to safe water als, and food is the main barrier. Moreover, for mi- in 2022, 15 percent less than in 2021. grants and refugees, the need for salaried child labor Armed conflict and a lack of public fund- is an important additional barrier (22 percent). On the ing have led to severe damage to the electricity other hand, attendance has been affected by school infrastructure and disruption of electricity supply. closures due to COVID-19 containment measures. In Surveyed Libyan and migrant households who ac- addition, difficult working conditions have impacted cessed electricity mainly from the general grid reported education continuity due to teacher strikes in different 7.3 and 5.3 hours of power blackouts per day, respec- regions. Furthermore, access to distance education tively, during the week preceding data collection, ac- and online learning materials remained challenging cording to the REACH initiative. The World Bank esti- for Libyans and non-Libyans, according to OCHA. mates the total present value of economic loss caused A lack of repair and maintenance, contin- by electricity supply shortfalls at US$ 15.8 billion from ued attacks, and forced shutdowns of water facili- 2010–2018 (Loksha and Qaradaghi, 2022). The ties added extra strain on the already aging water General Electricity Company of Libya (GECOL) is ac- infrastructure and further degradation of services tively working on developing and diversifying its capac- availability. The lack of financial provisions for the ity for electricity production. The company announced water and sanitation sector limited and delayed in- that once all development works at power stations in frastructure repair and rehabilitation, as well as sup- Tripoli, Misrata and Tobruk are completed, production port for the procurement of much-needed supplies. capacity would reach 7400 MW. In addition, GECOL Prolonged electricity cuts have further affected the signed a memorandum of understanding with Total continuous flow of safe drinking water, while indis- Energy to develop a solar electricity plant in the South criminate attacks on water structures resulted in the of Misrata with a 500 MW generation capacity. 18 LIBYA ECONOMIC MONITOR 4 OUTLOOK & RISKS I t is impossible to forecast economic outcomes The primary downside risk, perhaps, is that in Libya with any degree of confidence due to of a backslide into violence and armed conflict. the high uncertainty surrounding political and Political tensions relating to national elections and security developments. In this section, we attempt to rival governments are high. A deterioration of the highlight key factors that may positively or adversely security situation or shocks to the global economy or impact the outlook for Libya. commodity prices would adversely impact economic The hydrocarbon sector’s performance will activity and household welfare. be a crucial determinant of economic activity and A deterioration of the country’s epidemio- fiscal and external performance. Suppose Libya logical situation could broadly impact Libya’s manages to ramp up production and avoid extended outlook. While the COVID-19 case numbers in Libya disruptions. In that case, it could benefit from soaring are at the lowest level since the beginning of the pan- global oil prices, which would translate into strong demic, the low level of vaccination and testing in the economic growth, higher fiscal revenues and an country is a concern, as is the limited capacity of the inflow of hard currency. This would positively affect health system to deliver services to the population. the trade, current account, and fiscal balances. Steep Moreover, further outbreaks of COVID-19 and/or the global oil prices could encourage greater investment emergence of new variants pose a risk to Libya’s eco- by foreign oil companies; however, foreign investment nomic and social outlook. in the hydrocarbon sector remains subject to high Inflationary and food security risks are el- levels of uncertainty associated with the turbulent evated. As a result of Libya’s heavy dependence on political and security situation. Significant spending food imports, specifically from Ukraine and Russia, commitments are unlikely during the current period food security in the country has been significantly of heightened political instability and will likely only impacted by the Russia-Ukraine crisis. Since the follow the successful completion of parliamentary start of the crisis, Libya has been facing wheat and and presidential elections. cereals supply disruptions, shortages, speculative 19 behaviors by producers and traders along the supply institutions. For example, the presence of two com- chain, and higher prices. The likelihood of resuming peting governments in the East and West and ongo- Ukrainian wheat imports is uncertain, whereas other ing negotiations around the management and use of large importers, including India, have imposed a ban oil revenues may complicate government spending. on exports to ensure their food security. The war in In turn, this would impede the state’s ability to deliver Ukraine may lead to further supply chain disruptions public services and finance development projects that and sharper than expected agricultural product price are sorely needed following a decade of conflict. increases. In addition, high global fuel prices may Libya is also vulnerable to the risk of a raise the prices of other imported goods. With higher downturn in the global economy. As the world inflation, consumers’ purchasing power will decline, economy continues to grapple with a series of shocks, likely resulting in lower consumption, increased food including the COVID-19 pandemic, the Russia-Ukraine insecurity, and greater use of negative coping mecha- crisis, ongoing lockdowns in China, and their impact nisms by vulnerable households. The authorities hope on commodity prices, supply chains, inflation, and to reinstate food subsidies to mitigate the impact of financial conditions, the risk of a global economic food price inflation on the population. However, po- slowdown, and potentially stagflation, is rising. A tential delays due to political tensions and/or inad- sharper than expected slowdown in global growth equate state capacity to swiftly roll out food subsidies could reduce global oil demand, thereby translating across the country could increase social tensions. into reduced exports and government revenues for Competition between rival governments will Libya, with knock-on effects on economic growth, fiscal likely continue to impact the functioning of state and current account balances, and foreign reserves. 20 LIBYA ECONOMIC MONITOR ANNEX: THE IMPACT OF THE RUSSIA-UKRAINE CRISIS ON LIBYA The Russia-Ukraine crisis will affect Libya in the While production levels are not expected to short term due to the impact on global oil and wheat increase, the dramatic rise in global oil prices prices. As a significant wheat importer from Ukraine, could increase Libya’s export revenues, if it Libya is facing supply disruptions, higher wheat maintains a reasonable volume of oil exports. prices, higher inflation, and lower consumption. On In the short run, Libya may not manage to expand the other hand, as a hydrocarbon exporter, Libya oil production in a significant way to benefit further is benefiting from soaring global oil prices, which from the rise in oil prices. Security incidents have directly translate into higher hydrocarbon and fiscal been causing significant disruptions to production revenues and an increased inflow of hard currency, and political tensions. Their spillovers on fiscal policy which positively affects fiscal and current account making continue to limit financing of infrastructure balances. This analysis assumes the persistence of maintenance, hydrocarbon exploration, and other oil production despite the political turmoil the country investments to expand production and export capacity. is experiencing. In the long-term, assuming progress Indeed, oil production has experienced significant towards peace and stability in Libya, the country volatility and disruption since the postponement of could benefit from increased hydrocarbon production national elections initially planned for December and export revenues as Europe diversifies its energy 2021. Nevertheless, the oil price per barrel in 2022 import sources. is projected to average almost 45 percent higher than in 2021. Higher oil prices alone will result in a considerable increase in export revenues. The inflow Effect on Trade Volumes and Prices of hard currency, sourced primarily from hydrocarbon exports, will also rise. Hydrocarbon revenues would Given the Libyan economy’s heavy reliance on only decline should production levels drop below an the oil sector, high global oil prices in response estimated 2022 average of 0.78 mbpd. to the Russia-Ukraine crisis will have a significant positive impact on the country. Despite its volatility The crisis also impacts the price and availability during the past decade of conflict, hydrocarbon of imported wheat and cereals. While Libyan GDP comprises over half of the country’s total exports to Russia and Ukraine are minuscule, Libya GDP. Hydrocarbon exports averaged 95 percent relies significantly on wheat and cereal imports from of total Libyan exports during the previous decade. these countries. For example, 54 percent of Libya’s In addition, hydrocarbon revenues comprised 98 wheat and meslin imports are sourced from Russia percent of fiscal revenues in 2021. and Ukraine, 65 percent of barley imports and 72 21 percent of maize or corn imports (Figure A.3). The crisis than food prices. Meanwhile, Libya continues ongoing crisis is likely to adversely impact, at least to rely heavily on imports to meet domestic food in the short-term, the supply of wheat and cereals to demand (90 percent of cereals and wheat are Libya until Libyan traders find alternative sources. imported), and much of these imported cereals and wheat are sourced from Russia and Ukraine. In the wake of the Russia-Ukraine crisis, the prices of staple Effect on Domestic Prices goods, including wheat derivatives, have hit record highs. Data from the REACH initiative reveals that the Whereas fuel subsidies will limit the pass-through price of the cheapest brand of flour was 17 percent of higher global oil prices to Libyans, the prices higher in May 2022 than in February 2022. Prices of of wheat and related products have increased couscous and bread increased drastically following significantly. Due to generous state subsidies, fuel the start of the crisis, reaching in May 2022 levels that and electricity prices are likely less affected by the were 80 percent and 34 percent higher, respectively, Composition of Libya’s Imports FIGURE A.1 •  FIGURE A.2 • Libya and Comparator’s Wheat by Source Country Imports by Source Country (average 2016–2020) (average 2016–2020) 100 90 Germany; 3,3% Tunisia; 3,2% 80 Greece; 3,9% 70 Percent of Total Rep. of Korea; 4,0% 60 Spain; 4,3% 50 Rest of the Egypt; 5,1% World; 40 33,0% 30 United Arab 20 Emirates; 7,8% Italy; 10 10,6% China; 13,0% 0 Turkey; Libya Nigeria MNA 11,7% Sudan Maghreb Average Average Russian Federation Ukraine Source: UN Comtrade and World Bank staff calculations. Source: UN Comtrade and World Bank staff calculations. Note: the Middle East & North Africa (MNA) average does not include Djibouti and Iraq. Share of Libyan Wheat and FIGURE A.3 •  FIGURE A.4 • Inflation Rate for Basic Staples Cereal Imports from Russia and (y-o-y %) Ukraine (average 2016–2020) 120% 100% 100% 10% 90% Price, y-o-y % change 36% 80% 80% 49% 70% 60% 60% 58% 80,6% 40% 50% 41% 20% 40% 30% 48% 0% 20% 23% –20% 32% 8,5% 10% 5% 10,9% –40% 0% Barley Maize or Wheat and Semi-finished –60% corn meslin products of iron Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 or non-alloy steel Flour price Pasta price Russian Federation Ukraine Rest of the world Couscous price Bread price Source: UN Comtrade and World Bank staff calculations. Source: REACH Initiative and World Bank staff calculations. 22 LIBYA ECONOMIC MONITOR compared to February 2022 (Figure A.4). This rise of record high global oil prices to increase irs in prices translates into higher inflation and lower hydrocarbon revenues. That could more than offset consumption by a population already reeling from the the projected increase in spending on fuel subsidies impact of the civil conflict and the COVID-19 pandemic and on the rising cost of electricity generation and on prices, poverty, and food security. It could push other fuel-related costs of public service provision. vulnerable and poor households that are mainly net food buyers further into poverty and hunger. Effects on Growth Effects on Fiscal and Current The Russia-Ukraine crisis will positively impact Account Balances Libyan growth in the short and long term. In the short term, Libyan growth should be positively The impact of the Russia-Ukraine crisis on fiscal affected by the Russia-Ukraine crisis through its effect and current account balances in the short term on oil prices. This assumes that Libya’s political and will depend on Libya’s ability to maintain oil security situation remains stable enough to allow production and exports. The increase in global for consistent oil production, despite the challenges wheat and food prices will raise the import bill for associated with holding national parliamentary and Libya in 2022; however this could be more than presidential elections. In the long term, contingent compensated for through increased oil export on positive progress towards peace and stability in revenues, with a resulting net gain in the trade balance Libya, the hydrocarbon sector could experience and current account balance if Libya manages to increased investment in production infrastructure reverse the trend of oil production disruptions that and maintenance and more significant investment have plagues the sector during the past few months. by foreign firms. 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Service Availability and 26 LIBYA ECONOMIC MONITOR 1818 H Street, NW Washington, DC 20433