LIBYA - The Economic Base.
The move ended a dual-rate system under which individuals requiring foreign currency used a "commercial rate", while an official rate was set for transactions involving state companies. In January 2002, the Central Bank devalued the dinar by 51% as a first step towards a market-driven exchange rate.
Libya has had big budget surpluses since 1999 thanks to high oil prices, which have risen rapidly since April 1999. Libya in 2000 had a surplus of about $3,000m. The surplus in 1999 was $2,136m. In 1998, when oil prices were very low, Libya had a deficit of $391m.
In November 2000 the authorities announced a five-year development plan calling for $35,000m in investments on infrastructural projects. These include an outlay of $3,500m to expand and upgrade Libya's oil refining sector, and $1,000m to have several water desalination plants built along the coast.
Largely because of the US and UN sanctions, the Libyan economy shrank in 1993-1995 and until end-1998 GDP's growth averaged less than 1% per annum. Unemployment by end-April 1999 was estimated at about 30%. The government was forced to set for 1999 an austerity budget which forecast spending at LD 4,900m ($10.9 bn).
Oil income in 1998 had fallen 35% to $5.25 bn, while the wage bill for the 700,000-strong public sector was $5.5 bn. It is said that the sanctions have caused Libya the loss of $26 bn worth of income opportunities (see Vol. 57, Downstream Trends No. 1).
The Central Bank has major external holdings through its offshore arm, Libyan Arab Foreign Bank (LAFB). LAFB has a big stake in Oilinvest, a holding company in charge of overseas petroleum investments. It has co-ordinated purchases into more than 30 global institutions through its subsidiary Libyan Arab Foreign Investment Co (Lafico).
The lifting of the UN sanctions in April 1999 led to an unfreeze of major Libyan assets for Central Bank, LAFB, Lafico and other Libyan-controlled institutions. (On Dec.y1, 1993 LAFB's assets abroad were frozen in compliance with the UN embargo).
The Central Bank has a major share in Arab Banking Corp. (ABC), one of the world's largest institutions, with its partners being the Kuwaiti Finance Ministry, the Abu Dhabi Investment Authority and other Arab investors.
The Abu Dhabi-based Arab Bank for Investment and Foreign Trade, in which Libya has a share, was affected by the embargo in recent years but it has recovered. Because of its Libyan connection it is boycotted by the US and some of its assets have been frozen, despite protests from the UAE.
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|Publication:||APS Review Downstream Trends|
|Date:||Jul 7, 2003|
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