In his report on Libya to the Security Council yesterday, UN Secretary General Antonio Guterres called for an end to the Libyan National Army’s oil blockade and reminded Member States of the commitments they made at the Berlin Conference. He also covered the economic situation in Libya.
According to Guterres , the sustainability of the economic situation in Libya is becoming increasingly tenuous, and the situation will be further exacerbated by COVID-19.
Since the blockage of oil exports imposed by the Libyan National Army on 17 January, the primary export of Libya was reduced from 1.2 million to 72,000 barrels per day, resulting in accumulated losses amounting to more than $4 billion.
To offset the diminished revenues, the Central Bank of Libya and the Government of National Accord attempted to impose long-overdue austerity measures, including cuts to the public service payroll and a reduction in fuel subsidies.
The blockage of oil exports also resulted in the shutdown of the country’s domestic oil refinery capacity, thereby requiring the National Oil Corporation to purchase refined petroleum products.
Although the Corporation had been providing sufficient refined fuel for commercial purposes, on 13 March, authorities in eastern Libya imported fuel from the United Arab Emirates to Benghazi, thus undermining the authority of the Corporation and marking the first time that fuel was imported outside normal Corporation channels.
The blockage of oil exports and the lack of agreement on a national budget caused delays in salary payments and a reduction in access to foreign exchange, leading to shortages and higher prices for goods. The branch of the Central Bank of Libya in Bayda’ stated on 9 March that it was unable to finance the parallel government beyond salaries, evidence of the growing reluctance of Libyan commercial banks to continue to finance questionable government bonds issued by the parallel Ministry of Finance in eastern Libya.
If left unaddressed, the prices of staple goods are likely to increase further, and tensions within the banking sector could lead to its collapse.
UNSMIL, in coordination with international financial institutions, continued its efforts to address economic issues, including the worsening banking crisis.
The UNSMIL-facilitated economic dialogue between the two branches of the Central Bank of Libya alleviated some stress on the banking sector, but workarounds are becoming increasingly difficult to maintain.
A lack of cooperation on the part of the Libyan authorities in facilitating the international audit review of the structure of the Central Bank also narrowed opportunities for the unification of that bank. Working groups, established during a second meeting of the economic track in Cairo in February, are working to find solutions, including by addressing deficiencies in development spending and revenue allocation.
Notwithstanding COVID-19, UNSMIL continues to address urgent economic issues, including with regard to resuming foreign exchange for basic commodities, facilitating public salary payments, ensuring adequate fuel supply, urging the disbursement of social benefits in exchange for a reduction in fuel subsidies and taking measures to support small and medium-sized businesses.