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Economy of Libya

Libya is one of the healthier African economies; it has the highest GDP in the continent. This is because of Libya’s vast petroleum and natural gas reserves. A majority of the exports are primarily petroleum based. Other exports include iron, steel and aluminium. The agricultural sector is also an integral part of Libya’s socialist-oriented economy.


Libya's per capita income is the highest in Africa, but its population is relatively small. The General People's Congress continued to pursue the goals of the ruling Revolutionary Command Council soon after the 1984 coup attempt. These goals included a more equitable distribution of income and services, greater government control of the economy, and independence from foreign influence.

Libya also dedicated increasing resources to showcase items such as major irrigation projects, overseas interventions, and a military buildup.

In 1992-93, the Libyan Government embarked on a gradual economic liberalization program. Recent developments include the issuance of regulations governing the privatization of selected public enterprises and the lifting of restrictions on private wholesale trade.  Its economy remains dependent upon revenues from exported crude oil.  Currently, oil production is 1.5 million barrels per day.

Libyan oil and gas licensing rounds continue to draw high international interest; the National Oil Company set a goal of nearly doubling oil production to 3 million bbl/day by 2015.

Only a small percentage of the Libyan labour force is employed by the oil industry, along with a few thousand foreign workers. A shortage of labour has led to a large number of foreign workers—mostly from other North African countries, western Africa, and the Middle East—in agriculture and industry.

Since the mid-1980s, however, Libya has attempted to reduce the umber of foreign workers because of the huge drain that their remittances to their respective countries have caused on Libya's reserves of foreign exchange.Libya is usually among the world's dozen largest producers of oil. Sales to Europe were enhanced by the closure of the Suez Canal between 1967 and 1975. During the 1980s, however, production and revenues declined because of an increased supply of oil on the world market. Libya has concluded barter agreements with some European and African countries to exchange petroleum for goods and services.

But Libya was a very poor agricultural country with bleak economic prospects until 1958, when petroleum was discovered 200–300 miles (320–480 km) South and South East of the Gulf of Sidra; crude petroleum was exported on an increasingly significant scale between 1961 and 1981.

The government exerts strong control over the economy. The petroleum industry was nationalized in the 1970s; state trade unions and industrial organizations run most other industries and utilities.

To reduce the country's heavy dependence on oil, economic policy has emphasized agricultural and industrial development. Declining oil revenues during the 1980s, however, led to frequent revisions and delays in planned developments. In 1988, domestic reforms liberalized economic policy and encouraged private enterprise.

Oil income increased markedly in 1972–73, when the government nationalized (with compensation) 51% ownership in subsidiaries of foreign petroleum firms operating in the country. The remaining subsidiaries were completely nationalized. At the same time, the price of petroleum rose dramatically, further increasing Libya's receipts. Since then, the economy has been almost inextricably linked to world oil prices.

Much of the income from petroleum was used to improve the cities, to modernize transportation, and to build up the military. The resulting migration of Libyans to urban areas created a growth in unemployment, spurring the government to invest in agricultural development in order to make farming more attractive.

Although petroleum production has dropped since the 1970s, oil exports continue to generate about 95% of export earnings and 25% of the country's GDP.

During the 1970s, Libyan Government expenditures did not keep pace with the rapid rise in oil revenues.  The resulting surplus led to the growth of large central bank foreign exchange reserves.  At their peak, these reached $14 billion in 1981, but OPEC's production restraints and softening oil prices led to revenue shortfalls, which have resulted recently in an annual drawdown of foreign exchange reserves by about $2 billion per year.  Reserves dropped to $3.5 billion in 1993.

Since 1981, fiscal difficulties associated with declining oil revenues combined with the effects of various socialist schemes have hurt merchants and other business professionals.  Although Libyans have experienced a dramatic rise in the standard of living during the past 20 years, more recent economic austerity measures as well as tighter internal security controls have caused a general deterioration in the quality of life for many Libyans.  Nonetheless, distribution of national wealth remains more equitable in Libya than in many other developing countries.

In response to Libyan support of terrorism, the U.S. Government prohibited the importation of Libyan crude oil into the United States in March 1982 and imposed strict controls on U.S.-origin goods intended for export to Libya.  A total ban on trade with Libya went into effect in January 1986.

UN sanctions were lifted in September 2003 and as Libya announced that it would abandon programs to build weapons of mass destruction. Almost all US unilateral sanctions against Libya were removed in April 2004, helping Libya attract more foreign direct investment, mostly in the energy sector

Libya is also a major exporter of natural gas and has several large gas liquefication plants. In addition, gypsum, salt, and limestone are produced in significant quantities. Libya has increased industrial production in recent years. The principal manufactures are refined petroleum, liquefied natural gas, petrochemicals, iron and steel, aluminum, textiles, handicrafts, and construction materials. Food processing is also important.

Farming is severely limited by the small amount of fertile soil and the lack of rainfall, and Libya must import about 75% of its food. The chief agricultural products are wheat, barley, olives, dates, citrus fruit, vegetables, peanuts, and soybeans. Large numbers of cattle, sheep, and goats are raised.

Most of the arable land is located in Tripolitania. To increase the amount of cultivatable land, a massive water development project, called “The Great Manmade River,” was begun in 1984. It is designed to carry water from underground aquifers in the Sahara through a 2,400 mi (3,862 km) pipeline system to irrigate 313 sq mi (811 sq km) in the coastal region. The project is expected to take 25 years to complete at a cost of $25 billion. By 1997, the system was connected to the cities of Tripoli, Surt, and Benghazi and also provided thousands of acres of farmland with irrigation water; the final phase of the project was still under construction in 2006.

Libya's annual earnings from exports are usually much higher than the cost of its imports, and in the 1990s it had the highest per capita GDP in Africa. Crude petroleum and natural gas are by far the leading exports; the main imports are machinery, transportation equipment, foodstuffs, and manufactured consumer goods. The principal trading partners are Italy, Germany, Turkey, France, and Spain.

Resources

Petroleum is Libya's most important mineral resource. First discovered in 1956 near the Algerian border, it has since been located mainly in the Surt Basin. The major oil fields are Zaltan, Amal, and Intisar A in the vicinity of Banghazi; the Dahra field is located near Misratah, and the Sarir field is near Darnah. Deposits have been located near Ghadamis on the western border, Murzuq in the southwest, and the Al-Kufrah oasis in the southeast.

Exploration for new deposits has concentrated on the western region and offshore, where a large field was discovered northwest of Tripoli in 1988. Libya's proven oil reserves represent almost half of Africa's, or about 2 percent of the world's. Libyan crude oil is low in sulfur content and therefore causes less corrosion and less pollution than most crude oils. The deposits are associated with natural gas.

The first pipeline was constructed from the Zaltan field to Marsa al-Burayqah in 1961. Since then additional lines have been built from Dahra to As-Sidrah and to Ra's al-Unuf, and other pipelines connect the Tobruk field to Marsa al-Hariqah and the Intisar A field to Az-Zuwaytinah. Refineries are located at Az-Zawiyah, Misratah, Ra's al-Unuf, and Tobruk.

A natural-gas pipeline runs parallel to the oil pipeline from Zaltan. The gas liquefaction plant at Marsa al-Burayqah is the world's largest.

Other mineral resources are limited. There are important deposits of natron (hydrated sodium carbonate) in the Fezzan and of potash in the Surt Desert near Maradah. The iron ore deposits at Shati', although low in iron content, supply the iron-steel complex at Misratah.

Marine salt is produced in Tripolitania, where there are also small deposits of gypsum, manganese, and lignite coal. Sulfur has been found in the Surt Desert, and there are scattered deposits of chalk, limestone, and marble that are quarried for the growing construction trade.

The arid climate supports few biological resources except for the grasslands of the Akhdar Mountains and the Nafusah Plateau, which are valuable for grazing. There are no hydroelectric resources, and oil represents the only domestic means of producing electricity thermally.

Agriculture, forestry, and fishing

Although agriculture is the second-largest sector in the economy, Libya is self-sufficient in few foods.  Higher incomes and a growing population have caused food consumption to rise.  Domestic food production meets only about 25% of demand.  A long-term objective is to become self-sufficient in agriculture, although the scarcity of water is a serious obstacle.

Agriculture is limited by the environment and by shortages of labour. Only about 1 percent of the total land area is cultivated, mostly on the Al-Jifarah and Barce plains, and about one-tenth of that is irrigated. An additional 8 percent of the land is in pasture.

Agricultural development by land reclamation and irrigation is a government priority. Libya is undertaking a multi-billion-dollar project to tap water resources deep under the Sahara to meet coastal population water needs in the 1990s.  However, technical and administrative problems are hindering progress.

The largest projects are at the Al-Kufrah oasis, Tawurgha', and Sarir, on the Al-Jifarah Plain, and in the Akhdar Mountains. The Great Man Made River project, under construction during the late 20th century, is the most ambitious. Pipelines will carry water from wells in the southern Sahara to Tripoli, Surt, Banghazi, Tobruk, and the Al-Kufrah oasis.

Cereals are the major crops throughout the country. Barley is the chief cereal grown because it adapts well to different climates and soils. Wheat is grown primarily on the eastern and western plateaus, and sorghum is raised in the Fezzan.

Olive plantations were introduced by the Italians on the Al-Jifarah Plain and on the Nafusah Plateau, and there are smaller olive groves in the east. Orchards of almonds, citrus fruit, apricots, and figs occur on small and large farms and on small, crowded plots in the oases. Dates are the principal crop of the southern oases. Grapes, broad beans, and peanuts also are grown. Tobacco is raised in Tripolitania.

Animal husbandry is important in Cyrenaica, where the herds are raised on communal grazing lands. Livestock includes sheep, goats, cattle, camels, horses, mules, and donkeys. Animals are raised for their milk, meat, and hides or for their services as a means of transportation. Cattle often serve as draft animals. A small amount of milk is produced commercially, and commercial poultry farms are developing around the larger cities.

Less than 1 percent of the land is in forests. Before the 1950s the only wooded area in Libya was the region of scrub brush in the Akhdar Mountains. Since then, the government has launched a massive afforestation program. Between 1957 and 1964, 27 million acacia, eucalyptus, cypress, cedar, and pine trees were planted in Tripolitania.

There is little demand in Libya for fish, and most fishing is carried out off the Tripolitanian coast by Libyan, Tunisian, Greek, and Maltese fishermen. The catch includes tuna, sardines, and red mullet. Sponge beds are also important. The sponges are harvested mainly by Greeks who are licensed by the Libyan government.

Industry

Industrial development is limited. Most factories are located in Tripoli and Banghazi and are managed by Arabs. The industrial work force is small: many of the factories employ fewer than 100 persons. A majority of the factories are engaged in the manufacture of processed food, beverages, cement, leather goods, and textiles. The government has monopolies for the processing of tobacco, salt, and esparto grass. There are also oil-related industries, which produce steel drums, tanks, and pipe fittings; and petrochemical plants are located near refineries.

The production of electricity for public consumption is a government monopoly. There are also private plants, such as the 25,000-kilowatt facility built by an oil company at Marsa al-Burayqah. The total installed capacity, all thermal plants powered by oil, grew more than sevenfold during the 1970s.

Libya faces a long road ahead in liberalizing the socialist-oriented economy, but initial steps - including applying for WTO membership, reducing some subsidies, and announcing plans for privatization - are laying the groundwork for a transition to a more market-based economy.

The non-oil manufacturing and construction sectors, which account for more than 20% of GDP, have expanded from processing mostly agricultural products to include the production of petrochemicals, iron, steel, and aluminum. Climatic conditions and poor soils severely limit agricultural output, and Libya imports about 75% of its food

Economy at a glance

GDP (purchasing power parity): $74.75 billion (2007 est.)

GDP (official exchange rate): $57.06 billion (2007 est.)

GDP - real growth rate: 6.8% (2007 est.)

GDP - per capita (PPP): $12,300 (2007 est.)

GDP - composition by sector: agriculture: 2.1%, industry: 83.1%, services: 14.9% (2007 est.).

Labor force: 1.83 million (2007 est.)

Labor force - by occupation:

agriculture: 17%

industry: 23%

services: 59% (2004 est.)

Unemployment rate: 30% (2004 est.)

Population below poverty line: 7.4% (2005 est.)

Household income or consumption by percentage share: lowest 10%: NA%, highest 10%: NA%

Inflation rate (consumer prices): 6.7% (2007 est.)

Investment (gross fixed): 8.9% of GDP (2007 est.)

Budget: revenues: $39.85 billion, expenditures: $19.47 billion (2007 est.)

Public debt: 4.7% of GDP (2007 est.)

Agriculture - products: wheat, barley, olives, dates, citrus, vegetables, peanuts, soybeans; cattle
Industries: Petroleum, iron and steel, food processing, textiles, handicrafts, cement

Industrial production growth rate: 5.6% (2007 est.)

Electricity - production: 21.15 billion kWh (2005)

Electricity - consumption: 18.18 billion kWh (2005)

Oil - production: 1.72 million bbl/day (2006 est.)

Oil - consumption: 266,000 bbl/day (2005 est.)

Oil - exports: 1.326 million bbl/day (2004)

Oil - imports: 1,233 bbl/day (2004)

Oil - proved reserves: 45 billion bbl (2007 est.)

Natural gas - production: 10.84 billion cu m (2005 est.)

Natural gas - consumption: 5.591 billion cu m (2005 est.)

Natural gas - exports: 5.246 billion cu m (2005 est.)

Natural gas - proved reserves: 1.43 trillion cu m (1 January 2006 est.)

Current account balance: $24.28 billion (2007 est.)

Exports: $40.47 billion f.o.b. (2007 est.)

Exports - commodities: crude oil, refined petroleum products, natural gas, chemicals

Exports - partners: Italy 36.8%, Germany 14.3%, Spain 8.7%, US 6.1%, France 5.6%, Turkey 5.3% (2006)

Imports: $14.47 billion f.o.b. (2007 est.)

Imports - commodities: machinery, semi-finished goods, food, transport equipment, consumer products

Imports - partners: Italy 18.9%, Germany 7.8%, China 7.6%, Tunisia 6.3%, France 5.8%, Turkey 5.3%, US 4.7%, South Korea 4.3%, UK 4% (2006)

Economic aid - recipient: ODA, $24.44 million (2005 est.)

Reserves of foreign exchange and gold: $79.6 billion (31 December 2007 est.)

Debt - external: $4.837 billion (31 December 2007 est.)

Stock of direct foreign investment - at home: $6.286 billion (2007 est.)

Stock of direct foreign investment - abroad: $3.333 billion (2007 est.)

Market value of publicly traded shares: $NA

Currency (code): Libyan dinar (LYD)

Exchange rates: Libyan dinars per US dollar - 1.2604 (2007), 1.3108 (2006), 1.3084 (2005), 1.305 (2004), 1.2929 (2003)

Fiscal year: calendar year

Communications    

Telephones: 483,000 (2006)

Telephones - mobile cellular: 3.928 million (2006)

Telephone system: general assessment: telecommunications system is being modernized; mobile cellular telephone system became operational in 1996; combined fixed line and mobile telephone density reached 75 telephones per 100 persons in 2006
Domestic: microwave radio relay, coaxial cable, cellular, tropospheric scatter, and a domestic satellite system with 14 earth stations.

Country code: 218

Satellite earth stations - 4 Intelsat, NA Arabsat, and NA Intersputnik; submarine cables to France and Italy; microwave radio relay to Tunisia and Egypt; tropospheric scatter to Greece; participant in Medarabtel (1999).

Radio broadcast stations: AM 16, FM 3, shortwave 3 (2001)

Television broadcast stations: 12 (plus 1 repeater) (1999)

Internet country code: .ly

Internet hosts: 24 (2007)

Internet users: 232,000 (2005)

Airports: 141 (2007)

Pipelines: condensate 882 km; gas 3,425 km; oil 6,956 km (2007)

Railways: 0 km
(note: Libya has announced plans to build seven lines totaling 2,757 km of 1.435-m gauge track (2006))

Roadways: total: 83,200 km

Merchant marine: 17 ships (1000 GRT or over) 67,200 GRT/85,931 DWT, by type: cargo 11, liquefied gas 3, petroleum tanker 2, roll on/roll off 1, foreign-owned: 3 (Kuwait 1, Norway 1, Syria 1), registered in other countries: 4 (Malta 3, Tunisia 1) (2007)

Ports and terminals: As Sidrah, Az Zuwaytinah, Marsa al Burayqah, Ra's Lanuf, Tripoli, Zawiyah

Military branches: Armed Peoples on Duty (APOD, Army), Libyan Arab Navy, Libyan Arab Air Force (Al-Quwwat al-Jawwiya al-Jamahiriya al-Arabia al-Libyya, LAAF) (2008)

Military expenditures - percent of GDP: 3.9% (2005 est.)

Refugees and internally displaced persons: refugees (country of origin): 8,000 (Palestinian Territories) (2007).

Last Updated on Sunday 3rd August 2008