The International Monetary Fund has warned that Libya’s current fiscal path is unsustainable, despite rising oil revenues, highlighting growing risks to inflation, foreign reserves, and economic stability.
In its latest Article IV consultation statement, the IMF said Libya’s public spending has expanded sharply, with fiscal deficits reaching about 30 percent of GDP in 2025. Public debt has also surged to around 146 percent of GDP, nearly doubling in two years, while inflation has entered double digits, reducing purchasing power.
An IMF official said urgent fiscal reforms are needed to stabilise the economy. “Without decisive adjustment, current policies will remain difficult to sustain and could worsen macroeconomic imbalances,” the statement said.
The warning comes as Libya continues to rely heavily on oil revenues, which remain vulnerable to global price fluctuations. The IMF noted that while higher oil prices offer temporary relief, spending these gains could deepen long-term vulnerabilities if reforms are delayed.
For citizens, the economic pressures are already visible. Rising inflation and a weakening currency have increased the cost of living, while access to foreign currency remains limited. This has affected imports, including food and fuel, adding strain on households.
Libya’s broader economic situation remains shaped by political divisions and institutional fragmentation, which continue to hinder effective fiscal management and reform implementation across the country.
The IMF also highlighted structural challenges, including large energy subsidies and a high public sector wage bill, both among the highest globally. These factors contribute significantly to fiscal imbalances and limit investment in productive sectors.
Looking ahead, the IMF urged Libya to save excess oil revenues, reduce spending, and implement structural reforms. These include improving tax systems, strengthening governance, and supporting private sector growth.
Officials said that without such measures, Libya risks further economic instability, while effective reforms could help restore confidence and support sustainable growth in the coming years.