The Central Bank of Libya has issued a stark warning about the detrimental economic effects of the ongoing political fragmentation in the country. Libya remains divided between two rival administrations, one in the east based in Tobruk and the other in the west, centered in Tripoli. This division, the bank states, is contributing to significant economic instability and could have severe long-term consequences.
The central bank’s statement highlights that the dual public spending by the two governments has exacerbated the country’s financial imbalance. In 2024, Libya’s total public spending reached 224 billion dinars (approximately 46.49 billion USD), with the Tripoli-based government contributing 123 billion dinars (25.53 billion USD) and the eastern government spending 59 billion dinars (12.25 billion USD). A significant portion of this expenditure, 42 billion dinars (8.72 billion USD), went towards fuel subsidies. While these subsidies may help alleviate immediate social pressures, the bank warns that such spending, coupled with competing administrative priorities, is leading to a widening gap between demand and supply of foreign currencies.
The economic consequences are far-reaching. The central bank has pointed out that these issues are destabilizing the exchange rate and devaluing the Libyan dinar. Additionally, the country’s oil exports and tax revenues in 2024 amounted to 136 billion dinars (28.23 billion USD), but this revenue is insufficient to balance the massive public spending. If the two governments continue their high-spending policies, Libya is likely to face a worsening budget deficit, increasing public debt, and a strained balance of payments, further deepening the country’s financial troubles.
Since the fall of Muammar Gaddafi in 2011, Libya has struggled with political fragmentation. The dual spending and competing political interests now pose a real threat to the country’s economic recovery and future stability. The central bank’s warning underscores the urgency of finding a political resolution, as the current situation is unsustainable and could lead to more severe economic and social challenges in the coming years.
