IMF Praises Libyan Economic Recovery

An International Monetary Fund (IMF) mission led by Mr. Ralph Chami visited Tripoli during February 20–March 7, 2013, to conduct discussions with the Libyan authorities in the context of the annual Article IV consultations.

Discussions focused on measures to improve the business environment to foster inclusive growth based on diversification of the economy underpinned by private sector–led growth, develop the financial sector, and control government spending including through subsidy reform.

The mission met with Prime Minister Ali Zeidan, Finance Minister Haithem Jalgham, Central Bank Governor Saddek Elkabeer, General National Congress Chairman Mohammed Magariaf, and other government and central bank officials, as well as members of the General National Congress and representatives of civil society.

At the conclusion of the discussions, Mr. Chami made the following statement:

"Economic growth in 2012 exceeded 100 percent, reflecting a strong recovery from its collapse during the revolution. Latest indicators are pointing to a restoration of hydrocarbon output later this year and a full recovery of growth in the nonhydrocarbon sector in 2014. Inflation fell to 6 percent in 2012, and a further decline is expected this year. With a considerable pickup in reconstruction expenditure and private demand, nonhydrocarbon growth is expected to average 15 percent during 2013–18.

"The financial situation began to normalize after most of the UN sanctions that had frozen Libya’s foreign assets were lifted on December 16, 2011, allowing the central bank to provide foreign exchange liquidity to banks and help normalize commercial banking operations. In 2012, broad money grew by 11.5 percent with a shift from currency into deposits reflecting increased confidence in the banking system. The banking sector appears well capitalized, but it may be vulnerable to asset quality deterioration. More recently, the authorities have introduced legislation that prohibits the payment of interest, which unless handled carefully, could pose risks to the financial sector and undermine efforts to diversify the economy.

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