São Paulo – After the conflicts that brought dictator Muammar Gaddafi’s regime to an end, Libya faces the challenge of rebuilding the foundations of its economy, infrastructure, banking system and public sector. This was one of the conclusions presented this Monday (30th) by a delegation of the International Monetary Fund (IMF) that went to the country to assess the issues to be addressed.
The country’s oil production, which was 1.77 million barrels per day in 2010, dropped to 22,000 in July 2011 and then reached 980,000 by December, after the dictator was ousted and killed. The IMF believes that before 2012 is over, the hydrocarbon industry will return to pre-crisis levels, in turn helping the Gross Domestic Product (GDP) to grow.
The growth of the economy, which stood at 0.5% in 2009 and 2.9% in 2010, was negative by 60% in 2011, according to the Fund’s estimates. Calculations indicate that growth rates will be 69.7% this year, 20.25% in the next one, and 6.6% in 2014. In 2011, the hydrocarbon industry’s GDP declined by approximately 50%, and those of other industries plummeted by 71%.
Last year, inflation increased, provision of basic products and services was halted, and Libyan investment in foreign countries was frozen. Furthermore, the government had to reallocate its spending so as to raise public sector wages, compensate for the decline in oil revenues, and cater to “humanitarian needs.” The country did not lose its access to foreign credit.
The IMF’s mission suggested that in the short term, the country needs to ensure a safe environment in order to attract private initiative and workers from other countries, who have left Libya during the conflicted period. In the medium term, Libya needs to develop a solid framework targeting economic stability, allow the private sector to develop, promote an inclusive growth environment, and lower the currency’s exposure to international oscillations.
Some issues need addressing. One is the government’s wage bill, which accounted for 9% of the GDP in 2010 and will be equivalent to 18.7% by 2012. “A high level of public sector wages will reduce the incentive for individuals to seek employment in the private sector and undermine efforts to advance economic diversification,” claims the IMF survey.
According to figures supplied to the IMF by the Libyan Ministry of Labour, the country’s unemployment rate is 26% and will only be lowered through economic growth, job creation for younger people and economic diversification.
*Translated by Gabriel Pomerancblum
