12 February 2025: UNSMIL and CBL urge agreement on a 2025 budget
This week we look at calls for a unified 2025 budget as economic pressures increase, as well as an AFRICOM visit to Libya and the detention of the Waha chairman over corrupt practices.
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Economic pressures rise as UNSMIL and CBL urge agreement on a 2025 budget and Suleiman doubles down on ending barter system
Incident: The CBL and UNSMIL have ramped up their calls this week for a 2025 budget to be agreed.
On 29 January, the Board of Directors of the Central Bank of Libya (CBL) held its first meeting for the year 2025 in Derna. The meeting was chaired by the Governor Naji Essa. The Board made several decisions, including developing a mechanism to start establishing investment funds to improve the business environment and involve the banking and private sectors in financing development projects. It also discussed the public spending policy for the year 2024 and its impact on the exchange rate and the unprecedented increase in demand for foreign currency. Importantly, they agreed to communicate with the relevant authorities to approve a unified budget for the year 2025 in accordance with a law issued by the House of Representatives (HoR) and implement reforms in public spending policies and other economic policies.
On 4 February, Essa met with the Chairman and members of the HoR Finance Committee. They reportedly discussed government spending plans for 2025, with a focus on budget unification and fiscal discipline. During the meeting, officials stressed the importance of ensuring timely salary payments while broader fiscal reforms are finalised. A comprehensive spending framework is expected to be in place by April 2025.
On 5 February, UNSMIL commented on the statement issued by the CBL Board of Directors and underscored ‘the urgent need for consensus on a balanced, unified budget’. UNSMIL continued: ‘A transparent and equitable budget is crucial for strengthening fiscal responsibility, optimising resource allocation, and ensuring economic stability in Libya’, while it will also enhance the CBL’s ability to implement effective monetary policies, stabilise the exchange rate, and manage public spending sustainably.’ In this context, UNSMIL called on all relevant authorities to work towards an agreement on a unified budget without delay. UNSMIL’s calls were supported and echoed by several Western embassies in Libya.
On 10 February, the Government of National Unity (GNU) Minister of Finance Khaled al-Mabrouk said in an interview with CNBC Arabia that the government hopes to have the state budget approved by parliament in the coming days. He added that that the Ministry is currently working according to the state financial law 1/12, and that they have continued with this approach since the beginning of the year until the budget is approved. He also said that that the expected growth rate for the current year is 14 to 16%.
In addition, NOC Chairman Masoud Suleiman has reiterated his intention to end the crude-for-fuel barter system by the start of March.
On 11 February, Suleiman reportedly instructed the NOC’s Marketing Department to stop using the barter method and return to working using the method of selling crude oil and buying fuel starting from March.
Comment: Since Essa was appointed as Governor in early October 2024, there has been little to no progress on agreeing a unified budget, with both the GNU and eastern authorities (and the armed groups pulling their strings), appearing to have ready access to the state coffers once more. Essa has maintained that setting limits on state spending is a fiscal decision that needs to be set by the executive authority, not the CBL, focusing instead on monetary policy. However, both the GNU and GNS are pursuing their own budgetary processes. For example, on 25 January, GNU PM Dabaiba granted permission to his ministers of Planning and Finance to raise the allocations of Chapter Three (Development) by more than LYD 21.2 billion. In the absence of an approved budget (which has been the case for Tripoli governments for many years), the government accesses funds on the 1/12th basis, whereby each month they can spend 1/12th of the total spending from the previous year.
The barter system, introduced in 2021, cost Libya over 10 billion USD in 2024, with the Audit Bureau report for 2024 citing the opaque barter system and the subsequent loss of incoming oil revenues as a major reason for the 5 billion USD deficit for 2024. Previous NOC chairman Farhat Bin Qadara had pushed back against attempts to end the barter system however, highlighting the difficulties in securing the hard currency needed to buy the fuel. Suleiman has similarly warned of the risks of fuel shortages unless funds are secured. A key issue is the sky-high cost of the imported fuel bill which is much higher than it should be due to fuel smuggling.
Significance: Pressure is increasing on both the CBL and the GNU to address the financial situation while enhancing the principles of transparency, disclosure and the independence of the CBL itself. The need for a unified 2025 budget is becoming urgent, a position which the CBL shares on paper, though limited progress has so far been made on this front. Without some sort of agreement around spending, the risk is that the CBL will continue disbursing funds to both authorities with few checks and balances.
Not only will this significantly increase the amount of state spending, increasing the deficit and adding additional pressures to the Libyan economy, it will also remove important leverage over Libya’s elite – if they can already access the funds they need to remain in power and enrich themselves and their allies, then there is no incentive to participate in any sort of political dialogue or process.
In the absence of noteworthy progress on the budget, the CBL is going ahead with measures to ease the liquidity crisis and other monetary issues. However, the impact of these measures is likely to be limited and short-lived – these initiatives address the symptoms, not the cause of Libya’s financial difficulties.
As L-A has reported in recent weeks, reforming the barter system and tackling fuel smuggling and subsidies are major hurdles which need to be overcome. If the NOC does indeed halt the barter system in a little over two weeks, it will be a major challenge for the CBL to provide the hard currency needed to cover the monthly bill for imported refined fuel, estimated at around 750 million USD per month. Furthermore, needs are likely to be higher in the immediate term given Ramadan starts in March.
International observers and practitioners are likely to continue to urge for coordination between Libya’s economic policies, including financial and commercial ones, emphasising the need to improve professionalism within the banking sector, and to implement the unification of the banking sector, but limited results are to be expected in the short-to-medium term.
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US AFRICOM Deputy Commander visits Tripoli, Benghazi and Sirte to discuss security cooperation and support for military reunification
Incident: On 4 February, U.S. AFRICOM Deputy Commander John W. Brennan, U.S. Chargé d’Affaires Jeremy Berndt, and Rose Lopez Keravuori, Director of Intelligence at AFRICOM, met in al-Rajma with LNA Commander Khalifa Haftar to discuss the general political and security situation in Libya, including the return of Libyan ISIS fighters from Syria, the Russian military presence, ways to unify Libyan military institutions and security cooperation between AFRICOM and the LNA.
NOC stresses need for more budget to increase production; Attorney General detains Waha chairman over corrupt contracts
Incident: The NOC annual meetings continued this week, focusing particularly on the South. On 5 February, the acting Chairman of the National Oil Corporation (NOC) Masoud Suleiman met with representatives of the Waha and Mellitah companies and the National Supply company. He highlighted the importance of carrying out annual and partial overhauls, prioritising environmental protection programs, reducing gas flaring, and ensuring timely inspections of oil and gas pipelines without delays. The NOC, said Suleiman, ‘remains committed to neutrality and professionalism despite the challenges it faces, particularly the delayed disbursement of funding and the necessary budget required to sustain and increase production’.
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US AFRICOM Deputy Commander visits Tripoli, Benghazi and Sirte to discuss security cooperation and support for military reunification
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