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Economic Development

Enhancing Economic Stability

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Pillar Objectives

New fiscal revenue sources need to be identified to reduce the dependency of government finances on oil and gas revenues and increase spending capacity. A more stable and predictable fiscal revenue stream will enable more effective economic planning and allow Libya to meet increasing budgetary commitments. While sovereign wealth funds, such as the Libyan Investment Authority, have been used to balance the budget and finance development, other potential mechanisms for decoupling economic growth from oil price volatility need to be considered.

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Rebuilding National Infrastructure

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Transformation Projects for Enhancing Economic Stability

Transformation Project Profile

Libya needs to establish a regulatory and operational framework that ensures the transparency and accountability of its sovereign wealth funds. Our wealth funds must be managed within a sound governance structure and with appropriate investment strategies that are closely coordinated with macroeconomic policies and development of the broader economy.


Transformation Project Objective

  • Publicly disclose existing policies, rules, and procedures for funding, withdrawal, and spending
  • Develop a framework that identifies, assesses, and manages the risks of operations
  • Produce annual reports and financial statements on all wealth fund operations
  • Publicly disclose financial information on all wealth funds to demonstrate economic and financial orientation, enhance financial market stability, and improve recipient country trust.

Transformation Project Profile

Under the former regime, restrictions were placed on foreign currency transfers that contributed to the creation of a black market for unlicensed operators. A licensing system based on a regulatory framework that requires reporting of suspicious transactions along with greater supervision of large sum transfers will limit the use of unlicensed operators. A legitimate and more transparent system for currency transfer and exchange will also improve consumer safety and reduce criminal activity.

Transformation Project Objective

  • Introduce mandatory licensing for individuals and companies to conduct foreign currency transfers
  • Enable the Central Bank to more effectively supervise compliance with record-keeping obligations, combat unlicensed operations, and reduce illegal activity
  • Improve the regulatory framework to discourage illegal activity
  • Increase the Central Bank’s ability to identify suspicious transactions, money laundering, and financing of illicit activities

Transformation Project Profile

Libya’s sovereign wealth funds reduce vulnerability from oil price shocks by developing non-oil economic sectors and investment diversification. Current political and institutional difficulties present a challenge to transforming oil wealth into growth generating physical and human capital. However, the share of Libya’s oil wealth devoted to intergenerational, liquidity, and investment funds must be optimized to ensure long-term growth.

Transformation Project Objective
  • Ensure that Libya’s sovereign wealth funds are appropriately invested in assets with negative correlations to oil price movements
  • Optimize oil wealth allocation appropriately to intergenerational, liquidity, and investment funds considering the requirements for domestic investment and need for promoting intergenerational equity
  • Overcome Libya’s lack of integration into global capital markets by increasing the proportion of Libya’s oil wealth allocated to domestic investments

Transformation Project Profile

Well-functioning and efficient financial institutions and markets with sufficient flexibility to adapt to market needs and opportunities are central to economic development. With the passage of a new Islamic banking law in 2012, Libya signaled its intent to create a comprehensive Islamic financial system that meets the economic needs of the nation. Central to achieving this goal is the creation of a domestic capital market that allows corporations and the government to raise funds by issuing bonds.

Transformation Project Objective
  • Diversify funding options available for corporations and government
  • Establish a regulatory framework that encourages foreign direct investment
  • Raise the profile of the Libyan capital market as a stable market with solid credit metrics

Transformation Project Profile

Establishing a sound financial system will require adoption of internationally accepted standards for macroeconomic policy, data transparency, banking regulation and supervision, and market infrastructure. A roadmap for establishing these standards and implementing Libya’s Islamic banking law must be developed to overcome regulatory gaps, skills shortages, and limited public knowledge of Islamic banking products.

Transformation Project Objective
  • Implement an effective Islamic banking system that meets internationally accepted standards
  • Address regulatory gaps regarding the development of an Islamic financial services industry