Libya

Divided country

After the 2011 revolution which ended Gaddafi's 41-year rule, the civil war (2014-2020) resulted in the East-West division of the country. The Government of National Unity (GNA) administers the north-west. Based in Tripoli and the recipient of international recognition, it is led by Prime Minister Abdelhamid Dbeibah, the High Council of State (upper house) and the Presidential Council. The GUN has been mandated by the UN to lead Libya to presidential and legislative elections that were initially scheduled for December 2021. The indefinite postponement of these elections led to the creation of the Government of National Stability (GNS), based in Sirte and Benghazi, which controls three-quarters of the country (East and South), including most of the oil and gas facilities. It is led by Prime Minister Oussama Hammad and supported by the House of Representatives (Lower House) and the Libyan National Army (LNA) led by Marshal Haftar. Both administrations are supported by various militias – including foreign mercenaries, such as Africa Corp (formerly Wagner) in the East – or military corps, including Marshal Haftar's LNA (Libyan National Army), considered the de facto leader of the East of the country. Regular attempts are made to reunify the institutions, sometimes under the auspices of the UN Mission (UNSMIL) and the international community, but without success.

In the summer of 2024, the Central Bank of Libya (CBL) became the scene of a major political and financial crisis, reflecting this dual leadership. The replacement of the governor by a close associate of Dbeibah triggered a series of dramatic events: the kidnapping of the BCL's IT director, armed clashes in Tripoli between militias of opposing allegiances, and the suspension of banking operations. In response, the Eastern authorities blocked oil production and exports, severely hampering the country's economic activity. An agreement was finally reached in September 2024 under UN mediation that led to the appointment of a new governor and the resumption of activities. 2025 has also been marked by violence. In May, the assassination of Gheniwa, the leader of a highly influential militia in the GUN and the BCL, triggered numerous clashes between armed factions in Tripoli and an attack on the central bank's premises, killing 70 civilians. Although the circumstances of Gheniwa’s death remain unclear, suspicions point to Force 444, a militia formed by Prime Minister Dbeibah, who was politically opposed to Gheniwa, particularly regarding the BCL's policy. Like-minded suspicions have also been raised in connection with a similar incident at the end of July, raising fears of renewed tensions between factions and even further outbreaks of violence. While these political assassinations have certainly enabled Dbeibah to strengthen his grip on institutions and Tripoli, they are disrupting the central bank's activities, oil production and the lives of Libyans.

The political divide in Libya is part of a game of regional and international alliances. The GUN enjoys the support of Qatar and Turkey, with the latter supplying equipment and manpower (Turkish-Syrian militias) to the west. Conversely, the GSN is supported by Egypt, the United Arab Emirates and Russia, which has a presence at several air bases in the East of the country and appears to control the Maaten Al Sarra base in the far South. Neighbouring countries – Algeria, Tunisia, Chad, Niger and Sudan – have ambiguous relations with both governments. The rapprochement between Egypt and Turkey, which respectively support the SNG and the GUN, may encourage a rapprochement between the two factions.

After a chaotic 2024, a strong economic rebound in sight for 2025 on back of oil production

In 2024, economic activity was hampered by interrupted oil production and exports in the East of the country that lasted for more than five weeks, in retaliation for the dismissal of the Governor of the BCL – a sector that accounts for 60% of GDP. Growth is expected to rebound strongly in 2025, thanks to increased production – including compared to 2023 – provided that the political situation remains calm. Conversely, public spending is expected to decline sharply in 2025 after an unprecedented increase in 2024 (+60%).

Household consumption, like private employment (14% of total official employment, 5% for women), is largely excluded from statistics due to its informal nature. Highly dependent on imports, public employment and public spending, household spending is expected to grow only moderately, mainly due to the devaluation of the dinar in April 2025 and limited access to foreign currency – for so-called “non-essential” imports – which is subject to a 15% tax. Furthermore, although fuel and electricity subsidies contribute significantly to containing inflation, the latter remains largely underestimated despite the revised calculation method used in early 2025. Inflation is mainly driven by food prices.

Last, the central bank should continue to play a key role. In addition to managing foreign exchange reserves (31 months of imports) and the dinar exchange rate, it is also the guarantor of a balanced budget in the absence of coordination between the two governments and is often held responsible by the population for the country’s economic difficulties. The decision to abandon the oil swap mechanism, which enabled the two governments to carry out international exchanges of crude oil for refined products (fuel) under very opaque terms that encouraged corruption, should simplify the BCL's mission to a small degree: by regaining control over all foreign exchange earnings from crude oil exports, it should be able to better manage foreign exchange reserves, enhance budgetary transparency, and limit rent capture by militias. The revenues generated by the national oil company (NOC) should also benefit significantly from the abolition of this mechanism.

Highly uncertain budgetary situation

Usually in surplus, Libya's budget balance recorded a massive deficit (25% of GDP) in 2024 as a result of an increase in spending of more than 80 billion dinars (USD 16.5 billion). Three-quarters of this amount was earmarked by the Eastern government for “extra-budgetary expenditure”, without prior coordination with the West or any transparency, although presented as investments. The end of the oil swap mechanism also contributed to the increase in spending – through increased fuel imports and energy subsidies – as did investments in the NOC and the renovation of the electricity grid. The new tax on foreign currency transactions offset the decline in tax revenues from oil production, but only partially covered the increase in expenditure. In 2025, the deficit is expected to narrow significantly: subject to improved cooperation between the two governments – which is highly uncertain – public expenditure would contract sharply. In addition, revenues from taxation on oil production will increase significantly. They will offset the lower revenues from the foreign exchange transaction tax, the rate of which has been reduced from 27% to 15%.

The 2024 deficit significantly increased the country's debt. However, this debt is held entirely by the central bank. Denominated in the national currency, the debt bears no interest, has no repayment schedule and can be cancelled through administrative procedures.

In 2024, the external accounts deteriorated significantly under the combined effect of declining hydrocarbon exports and a sharp rise in imports fuelled by uncontrolled fiscal expansion. Despite the reversal, official reserves increased by USD 4.5 billion, thanks to a revaluation of gold assets. In 2025, the current account is expected to improve slightly, driven by the recovery in oil production. Imports will remain high, particularly due to the end of the oil swap mechanism, which now requires fuel imports to be included in the statistics. The services account will stay in deficit, as Libya employs foreign labour in the oil sector. Foreign direct investment (FDI) is stable and concentrated in hydrocarbons and related services. FDI comes mainly from operators that are already present in the country — notably Dutch, American, Italian and South Korean companies — which continue to take a cautious approach given the persistent institutional disorder, despite being offered numerous oil blocks. FDI often takes the form of joint ventures with the NOC, as required by Libyan law, and benefits from an incentive framework (tax and customs exemptions), but is limited by restrictions on foreign ownership.

Last updated:August 2025