Chaos-rid­den Libya’s econ­omy on the brink Libyan econ­omy nears col­lapse amid low oil prices

Kuwait Times - - BUSINESS -

TRIPOLI: Po­lit­i­cal stale­mate and the con­flict rock­ing Libya are pre­vent­ing the North African coun­try from tak­ing ad­van­tage of its vast oil re­sources and push­ing the econ­omy to­wards col­lapse, ex­perts say. When the 2011 up­ris­ing top­pled the regime of dic­ta­tor Muam­mar Gaddafi, Libyans dreamt of trans­form­ing their coun­try into an­other Dubai. To­day, they have some­what lower ex­pec­ta­tions. “To live in se­cu­rity, have elec­tric­ity, fuel and a salary, and send our chil­dren to school. We’re not ask­ing for any­thing more than that,” said Mah­moud, a 35-year-old Tripoli res­i­dent.

Long queues form ev­ery morn­ing at banks, which do not have enough cash to meet cus­tomers’ needs, and the peo­ple face un­prece­dented high prices. The World Bank re­ports a “sub­stan­tial loss in real pur­chas­ing power of the pop­u­la­tion”, with ba­sic food prices leap­ing 31 per­cent in the first quar­ter of the year. Mean­while, in the ab­sence of po­lice or army, crime is rife in the cap­i­tal. Car theft, kid­nap­ping for ran­som and vendet­tas be­tween armed groups are com­mon. Af­ter 42 years in power, Gaddafi left be­hind a di­lap­i­dated in­fra­struc­ture, an econ­omy to­tally de­pen­dent on oil rev­enues and a poorly skilled work­force. In the five years since he was killed, most for­eign in­vestors have fled.

‘Mired in re­ces­sion’

“The Libyan econ­omy is near col­lapse as po­lit­i­cal stale­mate and civil con­flict pre­vent it from fully ex­ploit­ing its sole nat­u­ral re­source: oil,” the World Bank warned. Libya may have Africa’s largest oil re­serves, es­ti­mated at 48 bil­lion bar­rels, but pro­duc­tion and ex­ports have slumped dra­mat­i­cally through years of cri­sis. Libya pumped around 1.6 mil­lion bar­rels of crude a day be­fore Gaddafi’s over­throw, but the en­su­ing chaos hit pro­duc­tion which fell as low as 290,000 in re­cent months, ac­cord­ing to the Na­tional Oil Com­pany (NOC).

Cou­pled with low global oil prices, this has left the econ­omy “mired in re­ces­sion since 2013”, with record high deficits, the World Bank said. Libya has lost more than $100 bil­lion (91 bil­lion eu­ros) in oil rev­enues since 2013, ac­cord­ing to NOC chair­man Mustafa Sanalla. Oil in­come has fallen to record lows, hit­ting just $2.25 bil­lion (2.05 bil­lion eu­ros) in the first seven months of 2016, ac­cord­ing to the World Bank. That is far from the $50 bil­lion (45 bil­lion eu­ros) per year oil rev­enues brought Libya un­der Gaddafi.

The sec­tor, which used to bring in 95 per­cent of state rev­enues, has fallen vic­tim to feud­ing be­tween mili­tias and ri­val gov­ern­ments that have torn the coun­try apart. Oil pro­duc­tion fell to near zero dur­ing the 2011 up­ris­ing. In the fol­low­ing months it came close to pre-revo­lu­tion lev­els, but in 2013 tum­bled again as protests and vi­o­lence erupted around key ex­port ter­mi­nals in eastern Libya’s so-called Oil Cres­cent. In Septem­ber, the four ter­mi­nals were seized by forces loyal to Field Mar­shal Khal­ifa Haf­tar, who is al­lied to an author­ity in the east that op­poses the in­ter­na­tion­ally rec­og­nized unity govern­ment based in Tripoli.

Dam­aged in­fra­struc­ture

Af­ter Haf­tar’s takeover, ex­ports quickly re­sumed-a de­vel­op­ment wel­comed by the NOC which has sought to re­main neu­tral de­spite the two gov­ern­ments’ in­tense ri­valry. But re­pair­ing in­fra­struc­ture dam­aged by fight­ing will take time, and the World Bank does not ex­pect pro­duc­tion to re­turn to ca­pac­ity un­til 2020. Even as ex­ports re­sume, the cri­sis is likely to con­tinue as rev­enues strug­gle to match vast pub­lic spend­ing, Karima Mu­nir, an in­de­pen­dent Libyan ex­pert said.

“The coun­try is a mas­sive wel­fare state and al­ter­na­tive sources of in­come need to be found,” she said. “The re­liance on oil has had a se­vere im­pact on the econ­omy and put pres­sure on (cap­i­tal) re­serves.” To bridge the rev­enue gap, the au­thor­i­ties have drawn on dwin­dling cur­rency re­serves which the World Bank says have fallen from $107.6 bil­lion (97.7 bil­lion eu­ros) in 2013 to $43 bil­lion (39.0 bil­lion eu­ros) in 2016.

Cur­rency ex­change re­stric­tions and spec­u­la­tion are push­ing the econ­omy into a vi­cious cy­cle and boost­ing a flour­ish­ing black mar­ket. Most Libyans no longer trust the banks and al­most all trans­ac­tions hap­pen on the black mar­ket. Su­per­mar­ket shelves are empty as traders cut imports for fear of losses in a wildly fluc­tu­at­ing mar­ket. One of the few busi­ness lead­ers still in Tripoli warned that things could de­te­ri­o­rate fur­ther. “The sit­u­a­tion could get even worse if a quick so­lu­tion isn’t found to the prob­lem of liq­uid­ity,” he said.—AFP

TRIPOLI: Libyans ride a horse-pulled-cart on Mar­tyrs’ Square in the cap­i­tal Tripoli. When the 2011 up­ris­ing top­pled the regime of dic­ta­tor Muam­mar Gaddafi, Libyans dreamt of trans­form­ing their coun­try into an­other Dubai, but the po­lit­i­cal stale­mate and the con­flict rock­ing Libya are pre­vent­ing the North African coun­try from tak­ing ad­van­tage of its vast oil re­sources and push­ing the econ­omy to­wards col­lapse, ex­perts say. —AFP

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.