The Executive Board of the International Monetary Fund revealed, during the report on the conclusion of the Article IV consultations for the year 2023, on Friday, that the Central Bank of Libya was able to maintain a large stock of international reserves, supported by a combination of a fixed exchange rate, capital controls, and many other temporary arrangements, after it was There have been extraordinary fluctuations in oil production and revenues since 2011.
The IMF emphasized that the reunification of the central bank is crucial to strengthening monetary policy and supporting financial stability and promoting private sector development.
The International Monetary Fund stated during its consultation that Libya’s economic fortunes will depend on oil and gas production in the foreseeable future, and that hydrocarbon production is expected to grow by about 15% in 2023 after increasing oil production from one million barrels per day in 2022 to about 1.2 million barrels per day in 2023 and gradually increase.
This is due to the sharp contraction of the economy in 2020 due to the oil blockade and the drop in oil prices, which led to an inflated external and fiscal deficit, and a decline in foreign exchange reserves. Recently, the recovery of oil prices and the resumption of oil production led to budget and current account surpluses in both In 2021 and 2022, as the gross domestic product, which closely tracks oil production, remained volatile, and the inflation rate declined relatively despite the significant decline in the value of the dinar in 2021 and the rise in global commodity prices, rising from 2.9 percent in 2021 to 4.5 percent in 2022.
Looking at the future, and assuming that fiscal spending continues to be contained, the primary projection is that fiscal and external surpluses will gradually decrease over the coming years. The main risks for future expectations are the decline in oil prices due to expected regional global growth, and renewed conflict or social unrest that leads to disturbances in oil production.
The IMF indicated that frequent changes in the currency pegs should be avoided to maintain confidence in the exchange rate as the nominal anchor, and that maintaining the peg would allow the central bank to better protect foreign exchange reserves amid rising political and security risks.
The IMF encouraged the authorities to continue strengthening the framework for combating money laundering and terrorist financing, closely monitor the capitalization of banks, reopen the property registry to enable banks to mitigate credit risks and assess the creditworthiness of the borrower, and liquidate the Central Bank of Libya’s holdings in commercial banks over a more than longer term to allow them to work independently.