Libya: ECONOMY

Overview: In 2004 the Libyan government continued to dominate its socialist-oriented economy. Libya’s completely government-controlled oil exports provided about 95 percent of its export earnings, 75 percent of government receipts, and 30 percent of the gross domestic product. According to several 2005 U.S. government reports, a large portion of Libya’s income was squandered as a result of widespread corruption and waste. Other factors that contributed to the lost income were purchases of conventional arms and efforts to develop weapons of mass destruction, as well as large monetary donations to lesser-developed countries, which have been interpreted by some as Qadhafi’s attempts at influence-buying.

The government continues to control prices, credit, trade, and foreign exchange, and to restrict imports, thus resulting in very little economic growth, if any, in the private sector. Agriculture continues to be the second largest economic sector, but Libya imports nearly 80 percent of its food requirements. Libyans have experienced a declining standard of living, with high inflation, higher import prices, and even some shortages of foodstuffs.

With the lifting of sanctions, the Libyan government has announced plans to attract foreign investment, especially in its oil and gas production, and is seeking financing of critical infrastructure improvements in its national highways, railroads, telecommunications networks, and irrigation systems.

Gross Domestic Product (GDP): According to U.S. government estimates, the GDP for 2003 was US$35 billion, or US$6,400 per capita. A February 2005 U.S. Department of Energy report estimated a GDP of US$29.5 billion for 2004. Libya’s oil export revenues accounted for 95 percent of its hard currency earnings and 75 percent of government receipts. In 2004 oil export revenues were US$18.1 billion, and US$19.4 billion is being forecast for 2005. With some economic growth in the last two years, the GDP is estimated to have grown by 9.8 percent in 2003 and 7.7 percent in 2004, and a 6.8 percent growth rate is forecast for 2005.

GOVERNMENT Budget: Very little is known about actual figures of the Libyan government’s budget. In March 2004, the government released figures for 2003: revenues of US$9.8 million and planned expenditures of US$7.5 million.

Inflation: Price increases are difficult to measure because so little data on general price changes are available. Estimates of consumer price inflation for 2003 ranged from –2.1 percent to 2.8 percent. The estimate for 2004 was 3.3 percent, and about 4 percent inflation is forecast for 2005.

Agriculture and Fishing: Agriculture employs about 18 percent of the labor force (estimated at 17.9 percent in 1996) but provides less than 5 percent of the gross domestic product (GDP). In the 1970s and 1980s, agricultural self-sufficiency was considered a national priority, but is no longer. Libya currently imports nearly 80 percent of its food requirements. Animal husbandry is still a significant activity but relies heavily on imported animal feed. Fishing resources are not fully exploited. Despite large supplies of tuna and sardines, a general lack of trawlers, ports, and processing facilities dedicated to Libya’s marine agriculture contributes to low output. According to some sources, the lack of sufficient plankton in the waters along Libya’s coast, necessary to sustain any appreciable quantity of fish, is responsible for the meagerly productive fishing conditions.

Mining and Minerals: Deposits of gypsum, iron ore, potassium, magnesium, sulphur, and phosphate are present in some quantity. It has been reported, but remains unconfirmed, that uranium deposits have been discovered in the south. In the 1980s, approximately 200,000 tons of gypsum were mined annually. The extraction of crude oil dominates the mining industry.

Industry and Manufacturing: Oil and gas exploitation is Libya’s main industry and provides approximately 40 percent of the country’s domestic income. Libya’s other industries, of varying degrees of importance, include a petrochemical industry, the hub of which is Marsa el Brega, as well as iron and steel and construction. Libya’s National Oil Company manages the state-owned oil industry and controls more than half of the oil production, while Oilinvest manages all international investments.

Energy: According to a U.S. Department of Energy report, Libya’s estimated total energy consumption for 2002 was 0.668 quadrillion Btu, or 0.16 percent of the world’s energy consumption. This total energy statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar, wind, wood, and waste electric power. The 2002 estimated per capita energy consumption rate was 122.9 million Btu. Libya is the fourth largest producer of electricity in Africa and the second largest consumer of power. It currently has an electric power production capacity of about 4.6 to 4.7 gigawatts (GW). In 2000 it generated 19.5 billion kilowatt-hours (kWh) from thermal power stations that used locally produced oil and gas. Libya has an average consumption of about 3,500 kWh per capita. Libya’s demand for power is increasing annually by about 6 to 8 percent. The demand for 2010 is forecast at 5.8 GW, and for 2020 the demand is forecast at 8 GW.

Services: About 52.2 percent of the labor force worked in services in 1996. In 2001 services contributed approximately 40.9 percent of the gross domestic product.

Banking and Finance: In 1970 the Qadhafi regime nationalized all banks in Libya. In late 2000, the nationalized banks reported a total profit of US$367 million. In March 1993, a new law allowed the establishment of private-sector banks, but to this day the only foreign banks in Tripoli are the Arab Banking Corporation, the Bank of Valetta from Malta, and the Suez Bank of Egypt. In 2002 some analysts speculated that the government might privatize some of the banks, but no steps in that direction have yet been taken.

Tourism: There is great potential for tourism in Libya—with its beaches, 13 major archaeological sites, and desert tourism—but tourism is considerably underdeveloped because of Libya’s past poor image and recent world isolation. The number of tourist visitors has already grown from 85,000 in 1995 to nearly 200,000 in 2002, but a tourism infrastructure is badly needed, including quality hotels, restaurants, and resorts. A first step in improving this infrastructure was taken in April 2003 with the opening of a 299-room luxury hotel in Tripoli.

Labor: A 2001 estimate put Libya’s total labor force at 1.6 million. According to some sources, the rate of unemployment in 2003 was estimated to be at least 30 percent, affecting primarily the young. No significant changes in government wages have occurred since 1981. According to 2003 data, monthly salaries averaged US$190. Approximately 13 percent of the population—or about 700,000 people—work for the state. In 1996 agriculture employed approximately 17.9 percent of the labor force, industry (including mining, manufacturing, construction, and power) employed about 29.9 percent, and services employed about 52.2 percent. Labor laws define workers’ rights and duties, but it is unclear whether all of the laws are enforced.

Foreign Economic Relations: Libya is a member of the Arab Monetary Fund, the Council of Arab Economic Unity, the Islamic Development Bank, the Organization of Arab Petroleum Exporting Countries, the Organization of the Petroleum Exporting Countries, and the Union of the Arab Maghreb. Most of Libya’s import and export activities however, are not with its North African and Middle Eastern neighbors but with Italy, Germany, South Korea, the United Kingdom, France, Spain, Japan, and Vietnam. In June 2004, Libya applied for accession to the World Trade Organization (WTO) and currently has observer status.

Imports: The major products imported by Libya are machinery, transport equipment, food, and manufactured goods. These imports represented 36.5 percent of Libya’s gross domestic product in 2000. In 2004 imports were estimated at US$9.4 billion and are projected at US$10.2 billion for 2005. The primary origins of imports in 2003 were Italy (28 percent), Germany (11 percent), Tunisia (8 percent), the United Kingdom (7 percent), France (6 percent), and Turkey (5 percent). According to some sources, trade with South Korea accounted for 6.9 percent of Libya’s imports.

Exports: Libya’s major exports are crude oil, refined petroleum products, and natural gas, representing 47.9 percent of its gross domestic product in 2000. The primary destinations of exports in 2003 were Italy (39 percent), Germany (13 percent), Spain (13 percent), Turkey (7 percent), and France (6 percent). In 2004 Libya exported an estimated US$15.1 billion worth of products, and it is forecast that US$15.7 billion will be exported in 2005.

Trade Balance: U.S. government sources estimated 2004 exports at US$15.1 billion, while imports were estimated at US$9.4 billion, resulting in an estimated trade surplus of US$5.7 billion. The forecasts for 2005 were slightly higher, at US$15.7 billion for exports and US$10.2 billion for imports.

Balance of Payments: According to International Monetary Fund (IMF) and other reports, the current account balance for 2002 was US$3.1 billion. It was estimated to be US$6.8 billion for 2003 and US$8.8 billion for 2004. A current account balance of US$4.1 billion was forecast for 2005.

External Debt: Libya has always had a relatively low external debt. In 2002 the estimate of total medium- and long-term debt was US$4.4 billion. In 2003 it was estimated at US$4.2 billion, and for 2004 it was estimated at US$3.9 billion. The current forecast for 2005 calls for external debt to remain at US$3.9 billion. However, with a great need for infrastructure projects, and the lifting of United Nations sanctions and removal of the U.S. trade embargo, some sources project that Libya now will be able take advantage of overseas financing for some of its more important development plans. Hence, many of those same sources are forecasting a rise in Libya’s external debt in the coming years.

Foreign Investment: The oil and gas sector is the area of the economy in which most foreign direct investments have been made. Because of the sanctions against Libya, as well as Libya’s “erratic economic policy,” foreign funds continually declined in recent years. The United Nations Commission for Trade and Development reported an outflow of US$101 million for 2001. However, now that the sanctions have been lifted, some analysts see potential for foreign investments to increase. The Libyan Foreign Investment Board has hosted numerous investment conferences and trade fairs in an attempt to attract foreign investors. Despite such increased exposure and promises of economic policy reform by the Libyan government, tangible increases in foreign investment may not occur until some of the areas of concern expressed by potential investors are addressed by Libya, such as corruption in the government, changes in legislation and actual implementation of those legislative changes, and increased availability of credit and insurance coverage.

Currency and Exchange Rate: The currency used is the Libyan dinar (LD). As of March 31, 2005, US$1 equaled LD1.32940. In a major development in 2003, the currency was devalued by about 15 percent when the government changed its exchange-rate system, thus ensuring stability in the dinar.

Fiscal Year: Calendar year.

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