Over the past six months, waves of militia attacks, blockades of key ports and tribal economic demands in certain regions have had a devastating impact on Libya’s oil-reliant economy.
In order to cope with dwindling oil production, which has declined to 0.225 million barrels per day (bpd), Libya’s deputy central bank governor, Ali Mohamed Salem El-Hebri, confirmed on Tuesday that the oil-rich state has had to rely on its foreign currency reserves to aid Libya’s crippled economy.
Hebri told Reuters that Libya has used USD 7 billion of its foreign currency reserves and is likely to need another USD 6 billion to compensate for the recent economic downturn, fueled by the ongoing domestic disturbances. Libyan Prime Minister Ali Zeidan confirmed the government’s reliance on reserves on Wednesday.
“We are in a dangerous situation for the future,” Hebri told Reuters. “The foreign reserves will be affected hard by the current situation. We are spending from the reserves.”
Nevertheless, there is some cause for optimism, with Libyan oil minister Abdel Bari Ali Al-Arousi confirming to reporters on Wednesday that Libya is set to re-open all of its oil ports by December 10.
Speaking to reporters on the sidelines of the 164th Meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, Arousi said that Libya intends to resume its pre-summer-crisis oil production levels of 1.5 million barrels per day (bpd)—currently estimated to be only producing 15 percent of its capacity because of the strikes that targeted its main oil ports—within “one week to 10 days.”
“We have heard good news from the local people that they are going to attend to the situation,” he continued.
But it seems unlikely that the exports of the level achieved six months ago will be regained in only two weeks, raising doubts about the targets among some observers.
The Deputy Central Bank Governor shares this uncertainty towards the economic outlook for the North African state, particularly as the state purse is overwhelmingly reliant on oil revenues. The oil sector accounts for 25 percent of GDP and 95 percent of government revenues.
Hebri believes that oil revenues are expected to reach LYD 63 million by the end of this year, which he emphasized would be 10 percent below the predicted LYD 70 billion needed to maintain a positive economic outlook.
“The government needs to find real solutions to solve the problem as soon as possible,” Hebri said. “The reserve is not only there to solve the problems of deficit. The reserve is to keep the stability of the economy.”
With regard to the effect a decline in oil exports would have on the central bank’s monetary policies, the deputy governor hinted that Libya may be forced to seek foreign loans. He also suggested that more restrictive spending measures might be imposed if the government is unable to counter the unrest.
The IMF has itself recommended tighter restraints to public spending and planning for a long-term decrease on the economy’s reliance on oil.