In recent years, Libya has implemented certain economic and structural reforms, liberalization policies and tax incentives to encourage FDI. These approaches have highlighted a positive outcome to a certain extent, with the GDP growing
The economy of Libya is heavily dependent on the oil & gas industry, comprising of around 68% of the GDP and as much as 97% of exports. In recent years, the Libyan government has implemented various reforms to stabilize the economy to increase investment opportunities. The Central Bank of Libya has injected liquidity into the banking system and expanded electronic payment services, reducing the gap between official and parallel exchange rates. Banks have increased capital to meet Basel-II requirements, enhancing financial stability and credit availability. These reforms have focused on stabilizing the macroeconomic environment and fiscal consolidation.
Libya GDP Growth Rate:
Source: IMF
Foreign Direct Investment (FDI) is one of major approach through which economies can integrate into the global economy. According to Libyan General Authority for Investment Promotion and Privatisation Affairs, the inward position of OECD member countries in Libya was USD 4.2 billion in 2022. FDI in Libya was USD 603 billion in 2021 and USD 50 billion in 2022 according to Macrobond. As of 2022, 182 foreign companies were operating in Libya across various sectors, including oil, contracting, electricity, and telecommunications. This also includes 44 companies which were granted permission for operations in Libya in 2022.
Energy Sector Investment:
In 2025, the Libyan economy is projected for a major turnaround, with an expected increase in the oil production, reaching upto 1.5 million barrels per day (mbpd) according to IMF. In January 2024, Eni of Italy signed an USD 8 billion agreement with Libya’s National Oil Corporation (NOC) to develop two offshore gas fields, aiming to produce 750 million cubic feet of gas per day by 2026. Also, Spain’s Repsol resumed oil exploration activities in Libya in December 2024 after a 10-year hiatus. The company commenced drilling in the Murzuq Basin. Furthermore, British Petroleum (BP) resumed operations in Libya in 2023 after a decade-long hiatus, marking a significant return of international oil companies to the country.
Infrastructure Sector Investments:
In April 2024, the Turkish firm Terminal Yapi Merkezi and the British organization IRG International entered into a contract with the Libyan government to restore and manage the airport in Tripoli. Furthermore, in May 2024, the Libyan Turkish Company for Petrochemical Industries established a new facility to produce bitumen and asphalt, with a production capacity of 500 tons daily. Italian firms, including Bonatti, have expanded their contracts in Libya, especially considering the USD 8 billion gas agreement between Eni and the NOC. These firms are engaged in upgrading gas-fired power stations, advancing renewable energy projects, and modernizing the power grid.
The Road Ahead for Libya:
Libya is at a potential turning point, but sustained progress will depend heavily on political reconciliation, institutional reform, and economic diversification. Libya remains over 90% dependent on hydrocarbons for revenue and exports. Diversification is the need of the hour, wherein sectors such as agriculture & fisheries, renewable energy, logistics and tourism can be targeted for future investment opportunities. The success of such diversification program will depend on political unity & security guarantee, fostering local business environment, institutional reforms and sustained global engagement. If Libya can achieve political unification, implement effective fiscal reforms, and foster a more competitive private sector, it stands a real chance of transitioning from a fragile post-conflict state to a stable and resilient economy.
The author, Pratik Mandon, is a Manager at AGR Knowledge Services. He has been working on Middle East assignments and covered the Libyan economy dynamics in a recent custom research assignment
