Economy of Libya

Libya is an OPEC member and holds the largest proven oil reserves in Africa, with 41.5 billion barrels as of January 2007, up from 39.1 billion barrels in 2006. About 80% of Libya's proven oil reserves are located in the Sirte Basin, which is responsible for 90% of the country's oil output. The state-owned National Oil Corporation dominates Libya's oil industry, along with smaller subsidiaries, which combined account for around 50% of the country's oil output. Among NOC's subsidiaries, the largest oil producer is the Waha Oil Company, followed by the Agoco, Zueitina Oil Company, and Sirte Oil Company. Oil resources account for approximately 95% of export earnings, 75% of government receipts, and over 50% of GDP. Oil revenues constitute the principal foreign exchange source. Reflecting the heritage of the command economy, three-quarters of employment is in the public sector, and private investment remains small at around 2% of GDP.

Although agriculture is the second-largest sector in the economy, Libya depends on imports in most foods. Climatic conditions and poor soils severely limit farm output, and domestic food production meets only about 25% of demand. Domestic conditions limit output, while higher incomes and a growing population have caused food consumption to rise. Because of low rainfall levels in Libya, agricultural projects such as the Kufra oasis rely on underground water sources. Libya's primary agricultural water source remains the Great Manmade River, but significant resources are being invested in desalinization research to meet growing demand. Libyan agricultural projects and policies are overseen by a General Inspector; there is no Ministry of Agriculture.

The tourism industry was heavily hit by the Libyan Civil War. Before the war, tourism was developing, with 149,000 tourists visiting Libya in 2004, rising to 180,000 in 2007, although this still only contributed less than 1% of the country's GDP. There were also 1,000,000 day visitors in the same year. The country is best known for its ancient Greek and Roman ruins and Sahara desert landscapes.

Libya posted a 3.3% rate of population growth during 1960-2003. In 2003, 86% of the population was urban, compared to 45% in 1970. Although no reliable estimates are available, unemployment is reportedly acute: over 50% of the population under the age of 20. Moreover, despite the bias of labor market regulations favoring Libyan workers, the mismatch of the educational system with market demand has produced a large pool of expatriate workers, with typically better-suited education and higher productivity. However, because of shortages for manual labor, Libya has also attracted important numbers of less skilled immigrants. Expatriate workers represent an estimated fifth of the labor force.

The Government is in the process of preparing a financial sector reform program. Recent legislation setting corporate governance standards for financial institutions marks progress toward better management and greater operational independence of public banks. However, Libyan public banks still lack management structures supported by skills in critical areas like credit, investment, risk management, and information and control systems.<br>The new banking law reinforces the independence of the Central Bank of Libya and offers a legal framework for regulating banking activities, though some provisions call for improvement. Despite the progress brought by the new banking law that specifies and limits its duties and responsibilities, the CBL remains the owner of the public banks, leading to a potential conflict of interest between ownership and regulation.