Libya’s Fiscal Fiction

Fixing Libya’s economy will require undoing the racket, not cosmetic consensus 

Libya’s economy is in free fall, and its current path leads only deeper into dysfunction. For years, rival administrations in Tripoli and Benghazi have used state institutions as instruments of patronage rather than governance—spending without oversight, borrowing irresponsibly, and treating oil revenues as factional spoils. What coherence once existed was held together by high oil prices and Central Bank reserves. Both are now under threat.

Global oil prices have slid in recent months, cutting into Libya’s primary revenue stream. Simultaneously, the Libyan dinar has weakened, eroding household purchasing power and threatening inflation. Yet instead of pursuing fiscal restraint, both eastern and western authorities have ramped up spending—expanding public payrolls, subsidies, and off-the-books borrowing, even as revenues falter.

The scale of this mismanagement is particularly galling given Libya’s natural wealth. With Africa’s largest proven oil reserves—more than 48 billion barrels—Libya should be one of the region’s wealthiest nations. Algeria, with smaller reserves and a far larger population, has managed at least to maintain basic fiscal discipline and continuity in governance. Libya, by contrast, has seen unconstrained and unplanned spending since 2011, with successive governments treating the budget as a political tool to buy loyalty rather than build institutions.

Worse still, Libya’s key economic institutions—the Central Bank and the National Oil Corporation—remain vulnerable to politicization. Though the previous standoff over the Central Bank’s leadership has subsided, there is still no coherent fiscal or monetary policy. East and west operate in silos, issuing their own budgets and economic directives with minimal coordination.

Oil, which should fund development, instead bankrolls instability. Armed groups periodically blockade fields or ports to extract concessions. The state’s wealth flows not to schools or hospitals, but to militias, intermediaries, and corrupt networks embedded in both governments.

What’s needed now is not simply a technocratic fix, but a structural shift: Libya’s economic institutions must be restructured to serve the public interest, not political factions. As Emadeddin Badi at the Atlantic Council has argued in a recent article, these institutions should be re-centered as platforms for national governance—not as financing arms for rival elites. That means implementing strict, enforceable controls on how public money is allocated, disclosed, and audited.

International actors bear responsibility too. Treating Libya’s economic collapse as a secondary problem risks entrenching the very networks that have driven it, Badi warns. Supporting “unity” without reform simply centralizes corruption under a new name.

Without serious reform, Libya risks becoming a failed petrostate—where falling oil prices and a collapsing currency compound the damage already inflicted by years of looting. That future is avoidable. But it requires a break from the comfortable fictions of the past.

*Lonzo Cook is a journalist and writer. He spent two decades at CNN in a series of senior editorial and management roles including leading breaking news operations across Asia, the Middle East and Latin America. He currently works as a senior communications strategist, partnering with corporations and executives to develop integrated communication strategies to connect with audiences in our fast paced, ever changing engagement landscape.