Archive for the ‘Libya’ Category

Libya’s Economic Update April 2022 – World Bank

Since the delay of national elections in December 2021, political and security tensions and oil production disruptions have escalated. The confirmation of a new cabinet by the House of Representatives has returned Libya to a state of institutional division. While soaring global oil prices will have a positive impact on growth and fiscal and external surpluses, this hinges on the persistence of oil production. Meanwhile the population faces increasing food insecurity as global wheat prices rise.

While official national accounts data have been unavailable for much of the conflict period, rough estimates of GDP can be made using data on night-time lights, oil production, and government spending. (average of 1.2 million barrels per day (mb/d) compared to 0.4 mb/d in 2020). However, since mid-December 2021, there have been multiple production disruptions due to weather-induced port closures, infrastructure maintenance issues, and shutdowns by armed groups. Oil production in January 2022 recorded its lowest level since October 2020 (1.08 mb/d).

It is impossible to forecast economic outcomes with any degree of confidence due to the high level of uncertainty surrounding political and security developments. If oil production and exports continue without major extended disruptions, Libya will benefit from soaring global oil prices which will translate into higher fiscal revenues and inflow of hard currency. This will positively affect the trade, current account, and fiscal balances. Libya may face short-term wheat supply disruptions, higher wheat prices, and in turn higher inflation and lower consumption.

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Libya's Economic Update April 2022 - World Bank

Libya is Aspiring for Recovery and Healing, but Challenges Abound

New World Bank report details how the countrys trajectory for economic recovery will remain linked to the security and political environment; implementing urgent reforms will increase the likelihood of a successful resolution and recovery.

Tunis, April 22, 2021 The Libyan economy faces major challenges, including recurring disruptions to the oil and gas sector, the fragmentation of state institutions, and ongoing conflict.

The new spring 2021 edition of the Libya Economic Monitor details how, for most of 2020, the performance of the Libyan economy was the worst in recent record. A 9-month blockade that began in January 2020 cut the countrys crude oil to less than one-sixth of 2019 valuesthe worst monthly performance since the beginning of the recent conflict.

The blockade was debilitating for Libyas acutely undiversified economy, which relies on oil and gas for over 60% of aggregate economic output and over 90% of both fiscal revenue and merchandise exports. Fiscal revenues lost from the blockade amounted to around US$11 billion for the year, according to the Central Bank in Tripoli. These problems were exacerbated by the COVID-19 pandemic, which inflicted further economic and social dislocation on the war-torn country, which already suffered from a degraded healthcare system. Overall, the Libyan GDP plunged by 2020 despite resuming oil production in the last quarter.

Libya faces enormous economic challenges and desperately needs unified institutions, good governance, strong political will, and long overdue reforms, saidJesko Hentschel, World Bank Country Director for the Maghreb and Malta. The Libyan people have gone through so many tribulations. The security and political environments have seen signs of improvement lately. The road ahead will not be smooth, but it provides hope for peace, stability, and development.

The economic monitor estimates that the Libyan economy will partially recover in 2021 from the slump in 2020. GDP growth is forecast at 67% in 2021 in real terms. Oil and gas output will remain the main driver of economic growth in 2021. Higher international oil prices will help support the overall rebound in oil output, filtering through stronger government consumption and investment, and in turn supporting a recovery in private consumption. Growth in the non-oil sector will remain subdued, impeded by ongoing conflict; poor provision of services, including power; and the lingering effects of the COVID-19 pandemic.

The agenda for social policy and institutional reform is full and needs urgent attention. Besides peace and stability, the country needs urgent infrastructure investments and social assistance to vulnerable groups, including a more rapid and orderly vaccine rollout. With diminishing conflict and improving security conditions in large parts of the country, the Libyan government can focus on improving the provision of public services and creating conditions for a quick recovery in the non-oil sector.

The World Bank is committed to supporting Libya with technical assistance and analytical services, as well as Trust Fund and grant financing. The Banks priorities, set out in the Country Engagement Note (CEN) in February 2019, consist of two pillars: Accelerating Economic Recovery and Restoring Basic Service Delivery. The program focuses on actions that will concretely improve lives, with the World Bank Group developing its knowledge base for longer-term engagement with Libya through Advisory Services and Analytics (ASA) as well.

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Libya is Aspiring for Recovery and Healing, but Challenges Abound

Libya Economic Monitor September 2022

Libya is struggling to cope with a trifecta of crises, including the civil conflict, the COVID-19 pandemic and most recently, the impact of the Russia-Ukraine crisis. Notwithstanding the tempering of conflict intensity since 2021, the Libyan economy has been battered by the conflict. GDP per capita estimates in 2021 stood at about half of its value in 2010 before the start of the conflict. Since 2020, the population has been hit by multiple waves of the COVID-19 pandemic. In addition, food insecurity has worsened, precipitated by the Russia-Ukraine crisis and the resulting shortages and price increases for staple foods in the domestic market.

While Libya witnessed a significant rebound in economic growth in 2021, it has been experiencing volatility in the hydrocarbon sector, the mainstay of the economy, in 2022.

Despite the significant limitations faced by the two key sources of data on prices, they offer a consistent story of increasing inflationary pressures during 2021 and through the first quarter of 2022. Prices of essential goods (food and drinks, housing, electricity, water, gas and other fuels, and transportation) are the main contributors to Libya's higher official inflation rate since 2021.

The fiscal balance witnessed a massive reversal from a 64.1 percent of GDP deficit in 2020 to a 10.6 percent of GDP surplus in 2021. This resulted from the jump in oil production and prices and the exchange rate devaluation (much of the spending (particularly wages) was denominated in LYD, whereas 98 percent of revenues in 2021 were sourced from hydrocarbons denominated in US$). Libya's debt stock is large but manageable as long as hydrocarbon production and exports persist.

Libya's trade and current account balances rebounded in 2021 and early 2022, thanks to recovering oil exports and receipts. Estimates reveal that Libya's reserve position remains very comfortable. The official exchange rate remained relatively stable throughout 2021, but depreciation pressures are increasing.

The economic outlook is uncertain. It is impossible to forecast economic outcomes with any degree of confidence due to the high uncertainty surrounding political and security developments. However, if Libya manages to maintain or ramp up oil production and exports compared to 2021, or at least avoid extended disruptions, it could benefit from soaring global oil prices, which would translate into strong economic growth, higher fiscal revenues and an inflow of hard currency. This would positively affect the trade, current account, and fiscal balances.

Downside risks are high. The primary downside risk is a backslide into violence and armed conflict. Further outbreaks of COVID-19 and/or the emergence of new variants pose a risk. The war in Ukraine may lead to further supply chain disruptions and sharper than expected agricultural product price increases. High global fuel prices may raise the prices of other imported goods, leading consumers' purchasing power to decline and likely resulting in lower consumption, increased food insecurity, and greater use of negative coping mechanisms by vulnerable households. The presence of rival governments in the East and West, and ongoing negotiations around the management and use of oil revenues, may complicate government spending, thereby impeding the state's ability to deliver public services and finance development projects. A sharper than expected slowdown in global growth could reduce global oil demand, resulting in reduced exports, government revenues, economic growth, fiscal and current account balances, and foreign reserves.

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Libya Economic Monitor September 2022

Libya Economic Monitor – Spring 2021 – worldbank.org

Libya faces considerable hurdles in the drive for a more durable economic recovery following the resumption of oil production and exports. The countrys political leaders must address three short-term challenges in the policy agenda. First, the National Oil Corporation and the Central Bank of Libya must reach an urgent solution on the oil revenues held offshore at the Libya Foreign Bank. While fiscal transparency is a worthy objective, the impasse over

oil revenue deposits risks damaging government activities and fiscal operations. Second, the GNA in the west and the IG in the east must cobble together not only a unified but, more importantly, a reasonable budget for the remainder of 2021 that is consistent with the countrys development priorities and aligned with its institutional capacity. While they have struck an agreement for a unified budget for January-February 2021, they have left budget unification plans for the remainder of the year in limbo. Third, the competing branches of the Central Bank of Libya should advance the second generation of monetary reforms after the devaluation of the official rate in January. The next items on the agenda are the unification of the two branches of the central bank; the integration of the payments systems in the west and the east, and the resolution of liquidity problems both in the banking system and in the wider economy.

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Libya Economic Monitor - Spring 2021 - worldbank.org

Libya with nukes: Is the West ready for Putin to lose?

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Close your eyes and imagine a world without Russia.

If youre in the Baltics, Poland, Ukraine or any of the other territories that have suffered through the centuries under Russian repression, the scenario might sound like deliverance.

Russia is going to disintegrate, former Czech Foreign Minister Karel Schwarzenberg, a prominent aristocrat and longtime Vclav Havel confidant, recently predicted. Large parts of it will seek independence as soon as they can.

The prince should be careful what he wishes for.

While most experts say Schwarzenbergs prediction remains unlikely, the risk that Russia explodes under pressure from its failed assault on Ukraine has nonetheless set alarm bells ringing from Berlin to Washington, as military and diplomatic strategists contemplate a postwar scenario in which the country fractures into a patchwork of warlord-controlled fiefdoms, similar to those that dominated Afghanistan in the 1990s or present-day Libya.

When in history have the Russians faced a truly major defeat and their politics remained intact? asked Peter Rough, a former official in the administration of U.S. President George W. Bush who now heads the Center on Europe and Eurasia at the Hudson Institute, a Washington-based think tank. I dont see how a major military defeat could allow Putin to remain and the borders of the Russian Federation to remain what they are today.

Scenarios range from uprisings among Russias more than 20 ethnic territories sprinkled across the countrys 11 time zones to a full-scale descent intothe kind of conflict and lawlessness that has gripped Libya since the fall of its dictator Muammar Gaddafi. Either would pose grave threats to regional stability, with potentially profound consequences for Europe, including further disruption of supply chains, clashes between nuclear-armed factions and new waves of refugees fleeing a destabilized Russia.

The subject is so sensitive that the officials refuse to speak publicly about their deliberations or even acknowledge their contingency planning for fear of giving Russian President Vladimir Putin a welcome talking point and fueling Russian support for the war. (A recent event and report by the Hudson Institute on the issue prompted an angryresponsefrom Russian Foreign Minister Sergey Lavrov, for example.)

When asked byPOLITICO to discuss such scenarios during the Munich Security Conference last week, Western officials declined to address the subject on the record.

Could it happen? For sure, said Ivan Krastev, a political scientist and chairman of Bulgarias Center for Liberal Strategies who has advised a number of European leaders. Krastev stressed that disintegration isnt likely, but not impossible.

But focusing on this option is totally counterproductive, he added. If you say, were here to dismantle Russia, youre making a strong argument for Putins narrative that the West is the aggressor.

In fact, the Russian president returned to that theme again Tuesday in an address to the countrys political and military establishment on the state of the country ahead of the first anniversary of his full-scale assault on Ukraine.The elites of the West do not hide their purpose, he said, suggesting thatthe U.S. and its allies aim to destroy Russia.

On Wednesday, former Russian President Dmitry Medvedevwent even further,sayingRussia will disappear if it loses the war in Ukraine, which he blamed on the U.S.

If Russia stops the special military operation without achieving victory, Russia will disappear, it will be torn to pieces, Medvedev saidin a Telegram post, using the euphemism for Russias invasion of Ukraine.

That message resonates in a country repeatedly wracked by military conflict and still traumatized by the collapse of the Soviet Union.

Russias travails during World War I helped spark the Russian Revolution and a civil war that pitted Vladimir LeninsBolsheviks against a motley group of royalists, capitalists and other political forces known as the White Army. Thewar, one of the bloodiest in Russian history, included a number of pogroms targeting Jews. It ended in 1923 with the Red Army prevailing but left deep divisions in the society.

The dissolution of the Soviet Union in the 1990s which saw the breaking away of countries like Ukraine, Belarus and Kazakhstan, as well as EU countries like Estonia, Latvia and Lithuania played out more peacefully, but its far from certain similar agitation from the peripheries today wouldnt be met with a more forceful response.

The structure of the Soviet Union made its breakup relatively straightforward from a legal standpoint.In contrast, the Russian Federation is a single country with a very powerful central administration. Unlike the Soviet Union, where half of the citizens were non-Russian, 80 percent of the population of modern-day Russia identifies as Russian.

The most important factor preventing bloodshed in 1991 was that Russia didnt object to dismantling the Soviet Union. Its difficult to imagine that either Putin or a potential successor would idly stand by or that a majority of the population would allow them to if regions likeBashkortostanin the southern Uralsor Siberia, Russias treasure chest, where most if its natural resources lay buried,tried to break off.

One worry among Western planners is that if the war in Ukraine ends with the Kremlins defeat as most hope Russian soldiers will return home and carry on the fight there, helping to fuel the countrys disintegration.

Vladimir Putins attempt to reassemble the Kremlins lost empire could end up costing Russia at least some of its territory | Anatolii Stepanov/AFP via Getty Images

Many of the men fighting for Russia in Ukraine come from underprivileged Russian territories including the mountains of eastern Siberia, where much of the population has ethnic and cultural ties to Mongolia, and the NorthCaucasus,an area of diverse ethnicity that includes Chechnya and Dagestan.

The Chechen leader Ramzan Kadyrov, who played a central role in crushing the Islamist uprising in Chechnya in the early 2000s, recently said he intends to set up a private army modeled on the Wagner Group, a brutal mercenary force controlled by Putin allyYevgeny Prigozhin.

Speaking in 2011 in the North Caucasus, Putin made little secret of his distaste for the percolating independence movements there.

If this happens, then, at the same moment,not even an hour, but a second,there will be those who want to do the same with other territorial entities of Russia and it will be a tragedy that will affect every citizen of Russia without exception, hesaid.

That suggests any move by regions to free themselves of Moscows control would be bloody, both between the central government and would-be secessionists and among the regions themselves.

New statelets would fight with one anotherover bordersand economic assets, Marlene Laruelle, who directsthe Institute for European, Russian, and Eurasian Studies at George Washington University, wrote in a recent essay.Moscow elites, who control a huge nuclear arsenal, would react with violence to any secessionism.

What makes the possibility of a Russian collapse so alarming is, of course, the countrys nuclear arsenal a strategic ace-in-the-sleeve Putin has repeatedly made mention of over the past 12 months. On Tuesday, the Russian president announced he was suspending Russias participation in the New START Treaty, the last remaining nuclear arms control pact between Moscow and Washington.

In the run-up to the collapse of the Soviet Union, the U.S. and its allies were far from sanguine about the nuclear threat. U.S. intelligence warned at the time that tactical nuclear weapons, possibly including so-called suitcase bombs, could end up on the terrorist black market if steps werent taken to secure them.

While Washington welcomed the independence of the Baltic states, there was deep concern that parts of the Soviet nuclear arsenal could fall into the wrong hands in other corners of the empire, including Kazakhstan and Ukraine, with disastrous consequences.

Thats less of a threat in Russia today for the simple reason that there arent nuclear weapons in the potential breakaway regions, according to Western analysts.

The more worrying prospect is the outbreak of conflict between members of the Russian establishment, and a struggle for control of the armed forces. Political infighting has already broken out between the Wagner Group chief, Prigozhin, and the Russian defense minister, Sergei Shoigu, and the chief of the general staff of the armed forces, Valery Gerasimov.

On Tuesday, Prigozhin a Putin ally whose soldiers have been fighting near the Ukrainian town of Bakhmut accused his rivalsof withholding ammunition and air transport, adding that their actions could amount to treason.

A big question in any scenario of Russian disintegration is what role China would play. While instability in its resource-rich neighbor would present Beijing with a host of opportunities to fuel its voracious appetite for raw materials, from natural gas to potash, most observers believe it will not seek to redraw Russias borders.

China is going to be very careful, Krastev said.

Nor is there likely to be much demand by local Russian populations in Siberia or elsewhere to seek out Chinese domination. Russias outer regions are generally poor and rely heavily on the central administration in Moscow for money, one more reason for them to stick with the devil they know.

Whats clear is that while the crack-up of Russia might still be a low-probability event, its not one that Western planners can afford to ignore. AsRussia watchers debate the prospects for the countrys decolonization, they shouldnt dismiss the possibilitythat Putins attempt to reassemble the Kremlins lost empire could end up costing it at least some of its territory.

The tragedy of Russia is that it doesnt know where its borders are, Schwarzenberg, whose family fled Soviet-controlled Czechoslovakia in 1948, said.

The danger is that this could quickly become tragic not just for Russia, but for the rest of the world too.

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Libya with nukes: Is the West ready for Putin to lose?