Libya possesses enormous natural resources, such as oil, gas, and minerals. It is well-located geographically due to its proximity to Europe and its location in the middle of North Africa.
These factors have prompted the International Monetary Fund (IMF) to estimate the Libyan economy's growth to be 13.7 percent this year. Driven mainly by the recovery of the oil sector, this is the highest expected growth rate among Arab countries.
Largest oil reserves
Osama Mansour, the Islamic Development Bank Group (ISDB) representative in Libya, says Libya has the largest oil reserves on the African continent. It also has huge natural gas reserves, making it a key player in the global energy market. The extent of its gold reserves means it ranks sixth in the Arab world.
Mansour points out that his country has foreign exchange reserves of more than USD 80 billion, diverse foreign investments and no foreign debt. He also says that Libya is rich in huge untapped potential such as fertile agricultural lands, coasts that extend along the Mediterranean Sea and in the field of renewable energy, especially solar and wind energy.
Supporting economic diversification
He says the country is well-positioned for economic diversification and sustainable development. However, this is only achievable if there is good governance and the wealth generated from these projects is distributed justly and supports economic diversification to serve future generations, Mansour adds.
Nonetheless, there are big challenges ahead, he says. First, the country depends on oil; it accounts for about 95 percent of total exports and 60 percent of gross domestic product (GDP).
The obsolescence of the transportation network
Other challenges include the absence of unified economic policies, weak institutional governance, weak transparency, the multiplicity and congestion of financial and monetary institutions, and their lack of collaboration.
Mansour warns that among Libya's challenges are poor infrastructure, the obsolescence of the transportation network, limited logistics services, and the significant weakness of the digital infrastructure. The country's banking sector also faces problems because of the division between banking institutions. Modern financial services are also weak, and there is limited funding for the private sector.
He also says there is a human capital crisis, adding there's a skills gap, weak education and training outcomes, and limited innovation and development. "Any country like Libya can present or adopt some reforms... strategic reforms to achieve economic renaissance, economic transformation, and diversification," Mansour says.
Special Economic Zones
He says it is necessary to invest in smart agriculture, develop the tourism sector, focus on cultural and desert tourism, and establish special economic zones with attractive investment incentives.
He adds that financial and monetary reform and the unification of institutions are necessary economic reforms. "Libya needs to unify financial institutions, unify the exchange rate, develop an advanced capital market, and encourage listing on the stock exchange. This is in addition to modernising the banking system, developing digital financial services, reforming the support system and directing it to those who deserve it, developing a fair and effective tax system, and enhancing governance and transparency, especially in the oil sector."
The private sector in Libya
The private sector is also one of Libya's economic growth engines. However, to ensure this happens, procedures for establishing a company and doing business need to be simplified, and funds and bodies that support and finance emerging, small, and medium-sized projects need to be facilitated, according to some economists. "Partnership programmes between the public and private sectors must also be developed, as this would encourage foreign direct investment (FDI), support export industries, and enhance competitiveness", they said.
They said Libya also needs a national green economy strategy. This strategy should include investment in green hydrogen technologies, the development of waste management programmes, the protection of biodiversity, combating desertification, and improving water resource management.
Photo: Libya's economy has enormous potential (by Adobe).