By Sam Bourgi
Libya’s war-ravaged economy will look to oil exports for revival, but a devastating political impasse is making it difficult to guarantee security after the country plunged into chaos in 2011.
Libya boosted oil production in October, contributing to another record-setting month for the Organization of the Petroleum Exporting Countries (OPEC). S&P Global Platts believes the 14-member cartel produced 33.54 million barrels per day in October. Libya’s output rose by 190,000 barrels per day, as the country reopened major terminals that were forced offline because of the war. Libya’s production reached 530,000 barrels per day in October, which is about one-third of pre-crisis levels.
Libya’s National oil Corporation (NOC) intends to boost output to 900,000 barrels per day by the end of the year.
OPEC agreed in September to cap crude production at 33 million barrels per day. Libya will be exempted from the deal as the country looks to regain lost market share. Calls for exemption from other OPEC members, including Iraq and Iran, threatens to undermine the deal all together.
The World Bank expects Libya’s budget deficit to run at about 60% of gross domestic product (GDP) in 2016. The current account deficit is forecast at 70% of GDP. These figures are expected to improve in the coming years as oil production returns to full capacity.
However, Libya’s economic fate cannot be separated from its political realities. With rival factions competing for power, Libya is teetering on the brink of failed state. The World Bank has warned that the Libyan economy is “near collapse as political stalemate and civil conflict prevent it from fully exploiting its sole natural resource: oil.”
Major powers held a meeting on Libya’s economic future last week in London. The meeting brought together top Libyan officials as well as the foreign ministers of the United States, United Kingdom and Italy. Representatives from France, Saudi Arabia and the United Arab Emirates were also present at the meeting.
The meeting was intended to devise a strategy for strengthening Libya’s economy and helping to break the political impasse. Ageela Saleh, who heads Libya’s interim parliament, has refused to support constitutional amendments and cabinet approval unless Khalifa Haftar is appointed general commander of the Libyan National Army.
Sam Bourgi is a financial market analyst. He has more than six years of progressive experience in economic and financial analysis, research consulting and sectoral analysis.