An IMF mission led by Stephanie Eble held discussions with Libyan authorities in Tunis from March 30 to April 8. In its concluding statement, the Fund warned that persistently large fiscal deficits are intensifying pressure on the exchange rate, foreign reserves and inflation, calling for urgent fiscal adjustment.
Libya’s public spending expanded sharply in 2025, pushing the fiscal deficit to about 30% of gross domestic product (GDP). Public debt has nearly doubled in two years to 146% of GDP, while inflation has risen into double digits, eroding household purchasing power. Despite two devaluations since April 2025 and large foreign exchange sales, a sizeable gap remains between official and parallel exchange rates, reflecting excess demand for foreign currency.
The IMF cautioned that higher oil prices present both an opportunity and a risk. Using temporary oil windfalls to raise spending would deepen vulnerabilities and make future adjustment more painful once prices normalise. Instead, the Fund urged authorities to save windfall revenues to rebuild buffers and accelerate long‑delayed reforms.
Without meaningful fiscal consolidation, the IMF said current policies are increasingly difficult to sustain. Continued reliance on exchange rate depreciation, administrative controls and reserve drawdowns would prolong high inflation, distort markets and weaken private sector activity.
While near‑term growth is expected to continue, supported by fiscal spending, reserves are projected to decline to critically low levels over the medium term if policy adjustments are not made. Risks are heavily tilted to the downside, including potential oil production disruptions, falling prices and further increases in spending.
The IMF identified fiscal policy as the primary source of imbalances. It called for stronger non‑oil revenue mobilisation, expenditure rationalisation and credible budget frameworks. Energy subsidies, estimated at 20% of GDP, and the public wage bill, at around 30% of GDP, are among the world’s highest and require reform alongside targeted social protection.
On monetary policy, the IMF said exchange rate adjustment can help address distortions but cannot substitute for fiscal discipline. It urged strengthening the central bank’s independence, transparency and policy tools.
The IMF also highlighted the need for governance reforms, stronger anti‑corruption measures, improvements in the business environment and progress on anti‑money laundering standards, stressing that capacity development will be essential for sustainable reform.
–IMF/ChannelAfrica–
