World Bank warns of exhausting Libya foreign exchange reserves

BY Libyan Express Apr 21, 2018 - 20:33

World Bank has issued Libya’s Economic Outlook report on April 16, saying that at the current pace of spending in a context of conflict and insecurity, Libya will either exhaust foreign exchange reserves or be forced into ad hoc adjustments necessary to stave off crisis.

The World Bank report explains that the economic and social outlook assumes that political strife is resolved and a unified government can ensure macro-stability and launch a comprehensive program to rebuild the economic and social infrastructures in Libya.

“In this context, it is expected that oil production will progressively increase to reach its potential (around 1.5 million barrels per day (bpd)) by 2020, which is the time necessary to restore the heavily damaged oil infrastructure.” The report adds.

According to the report, growth is projected to rebound at around 15% in 2018 and an average 7.6% in 2019-20. Both the fiscal and current account balances will significantly improve, with the budget and the current account running surpluses expected from 2020 onwards.

“Foreign reserves will also start building up by 2020. They will average US$72.5 billion during 2018-2020, representing the equivalent of 27.5 months of imports.” The report elaborates.

However, the World Bank says that high inflation coupled with weak basic service delivery are likely to have increased poverty and exacerbated socio-economic exclusion. In 2017, inflation accelerated, exacerbating further the hardship of the population.

“Prices of all commodities continued to increase, mainly driven by acute shortages in the supply chains of basic commodities, speculation in the expanding black markets, and the strong devaluation of the Libyan dinar (LYD) in the parallel markets.” It pointed out.

Consequently, the report explained that inflation hit a record level of 28.4% in 2017 following the 25.9% in 2016.

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