Who am I? I live in a country that sits on enormous wealth. But this country turned in the worst economic performance in the world in 2014 and was 188th out of 189 countries in the World Bank’s Doing Business report.
This is Libya. A country with the largest oil reserves in Africa and a population of only 6 million people. The statistics are pretty alarming:
- In 2010 the IMF estimated that Libya would have growth of over 7% in 2014, the highest in the Middle East. The reality was minus 24%, the worst GDP figure in the world.
- Libyans’ average income per capita in 2010 was almost $12,000, the same as some European countries. In 2014 it had fallen to $6,570.
- Libya used to earn more than it spent, enjoying the second largest fiscal surplus in the Middle East. Now the situation is reversed: the government is spending a lot more than it earns and is running a fiscal deficit of over 40%, the largest in the world.
- Libya also used to export more than it spent on imports. In 2014 the country imported USD 12.4bn more than it exported. The World Bank estimates the current account deficit could increase to 70% of GDP in 2015.
- As a result, Libya’s foreign reserves are being used up. In January 2014, Libya had a comfortable $121 billion in the bank. By the end of 2015 the World Bank estimates there will be just $55 billion left.
- Hard currency was once freely available to Libyans wishing to travel or purchase from abroad. Now it is only available on the black market at twice the official rate of exchange. As Libyan reserves fall this gap will only widen.
Who cares about statistics? There are, after all “Lies, Damned Lies and Statistics.” But all Libyans should care about the fact that their country is facing bankruptcy. There is a scenario round the corner when the imports they depend on – from food to fuel – can no longer be afforded. This is indeed an alarming prospect.
Many will blame the international community for this economic crisis. It is true that one key factor is outside Libya’s control: the fall in world oil prices. But most of the problems stem from decisions taken within Libya: the reduction in production because of the lack of security for oil installations; the huge increase in government expenditure funding salaries in the public sector; and the lack of investment because of the continuing lack of stability in most parts of the country.
If that turmoil continues, the economic situation will certainly get worse. If the political dialogue succeeds, there is a prospect that it will improve. The improvement will not happen overnight. It will take time.
Libya desperately needs a Government of National Accord in Tripoli to begin the task of mending Libya’s injured economy. That government will have a huge list of priorities: to get the electricity working, to get the oil flowing, to clean the streets and get public services like schools and hospitals up and running effectively. All Libyans therefore need to get behind the efforts of the political dialogue to reach agreement, just as they were behind removing Qadhafi.
International donors and businesses are watching and waiting to offer support and assistance to the new Government. Outside help will be needed to help rebuild government services and fix the many aspects of ordinary life that have broken down. Many countries, including the United Kingdom and the European Union are ready to respond to an invitation from the future government of Libya for such help.
A classic quote about an employee was: “She should go far. The sooner she starts the better.” The same holds true for Libya. The sooner a political agreement is reached the better. When it is implemented, Libya should go far.