With GDP per capita up to US$ 9,000, Libya is a relatively
wealthy country. Higher oil prices in 1999 and 2000 led
to an increase in export revenues, which improved macroeconomic
balances and helped stimulate the economy. GDP growth
in 2000 was 6,5% and 3,1% in 2001. For the year 2002 growth
was expected to slow to just 0,2% but given the recent
increase in international oil prices this figure will
surely increase. There is a development plan that will
foster government capital expenditure in infrastructure
and hydrocarbons projects. This, combined with an increase
on foreign investment, will maintain GDP growth high for
the year 2003.
Although the exact budget has not been specified, several
Governmental sources talk about 35 billion USD to be allocated
towards this development plan.
Dr. Shukri Ghanem, Secretary of the General People's
Committee for Economy and Trade, explains the main guidelines
for the investments: "We are very interested in improving
the infrastructure: roads, bridges, etc. In the production
field we are trying to avoid direct involvement, because
we want the private sector and foreign investors to take
more responsibility. Another of the main goals is investment
in the oil sector and its production facilities, because
it is very important for the overall performance of the
economy and provides the most significant revenues in
foreign exchange."
Without leaving aside the social facet of this budget:
"The main target of this program is to create sustainable
and equitable development for the Libyan people its future
generations", adds Mr.
Ammar El-Tayef, Deputy Secretary of the General People's
Committee for Services Affairs, adding that a big bulk
of the budget will be destined to Education, Health and
Social Benefits.
The Prime Minister, Mubarak Abdullah al- Shamikh, backs
his words and claims that a large percentage of the increase
in nominal spending of the development budget will be
diverted towards health and education spending, but the
government has so far resisted calls to increase public-sector
salaries. In recent years, Colonel Gadaffi openly pledged
to slash the public-sector workforce, but this is unlikely
to happen as long as oil revenue remains strong. The fiscal
account has nevertheless recorded impressive surpluses
in 2002 and will do so in 2003, equivalent to 19.2% and
16.3% of GDP respectively (according to EIU sources).
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Financially speaking, Libya is in a healthy state.
Foreign reserves were worth US$13bn by October 2001
and even if the Lockerbie's compensations were paid,
Libya would still have total international reserves
of around US$8bn, equivalent to nine months of import
cover. The Central Bank of Libya decided to devalue
the dinar by 51% in January 2002 in an attempt to unify
the official and the commercial, or black-market, rate.
This decision has had a positive impact on the fiscal
balance as it has almost doubled the dinar value of
the government's oil exports revenues.
At the same time it has increased the price of consumer
goods, which will have an effect on inflation,
Dr. Jehaimi explains: "What we will have from
now is mostly imported inflation. This is because the
monetary policy from the Central Bank was followed by
a trade policy that eased many trade barriers, so the
prices of imported merchandise are more or less the same
in international markets. This has created many challenges
to locally produced goods, especially industrial goods,
that now have to compete, in terms of prices and quality,
which won't be very easy".
Inflation, 14% in 2001, is expected to grow to 19% in
2002. The devaluation led to some inflationary pressure,
reversing the previous three-year trend of deflation experienced
by the Libyan economy. This is because the price of some
imported goods at the official exchange rate have risen.
However, inflationary pressures have, to a large extent,
been offset by the fact that essential consumer goods,
including some foods and textiles, are subsidised by the
government, and their prices have not risen. Furthermore,
as the market exchange rate has remained unchanged at
around LD1.55:US$1, the price of privately imported goods
has also remained stable. |
Libya
