The African Development Bank has issued a report on Libya’s economic conditions for 2025. The report includes comprehensive analyses of macroeconomic trends. It also provides detailed recommendations for recovery. The report is titled “Improving Capital in Libya to Serve its Development.”
The report confirms the Libyan economy is poised for a recovery after a period of contraction. Growth is projected at 12.4% in 2025 and 4% in 2026. This growth will be primarily supported by improved oil production. Despite ongoing challenges, Libya holds significant development potential. This is based on reconstruction needs, abundant natural resources, and opportunities for diversification.
The report estimated that Libya’s economic transformation requires annual investments of about $6.9 billion by 2063. It also needs urgent annual development financing of $39.3 billion by 2030. These investments must be directed toward infrastructure, renewable energy, and agriculture.
Economic progress remains constrained by heavy reliance on oil revenues. Other constraints include a limited tax system and weak investment in strategic sectors. The report noted that the financial system is still in a deteriorated state. This limits the capital flows necessary to support growth and diversification.
The report quoted Maline Blomberg, the African Development Bank’s Country Manager for Libya. She said the bank is committed to supporting Libya’s development agenda. This is despite its key resources, like its strategic location and human capital, being underutilized. Blomberg stated that the right tools and partnerships can turn this potential into tangible progress. The bank is committed to supporting reconstruction, economic diversification, and strengthening institutions.
The report presented an integrated package of policy options. In the short term, it called for improving resource management and enhancing transparency. For the medium term, it focused on economic diversification and promoting private sector participation. In the long term, it recommended expanding revenue sources, modernizing tax policies, and strengthening institutional frameworks.
The report stressed the need to reduce reliance on oil revenues. It emphasized expanding the tax base and improving collection mechanisms. It noted Libya has great potential to mobilize domestic resources. However, wide tax exemptions, a large informal sector, and data gaps impede efficient revenue generation. Political uncertainty also remains a major obstacle.
Libya’s financial sector suffers from poor access to formal financing. It also has limited financial products, especially for small and medium-sized enterprises. The absence of a unified budget hinders planning. The report called for the Central Bank to strengthen its oversight of the parallel exchange market. It should also manage inflation with targeted policies. Inflation is expected to rise to 2.5% in 2025 and 2.7% in 2026 following the dinar’s devaluation.
The report noted that Libya is free of external debt. Domestic debt is projected to decrease from 91.5% of GDP in 2023 to 76% by 2028. At the same time, it warned of risks from lacking a national climate change adaptation plan. These risks include floods, drought, and desertification.
The report stressed that accelerating economic development requires prioritizing political stability. Comprehensive national reconciliation is also essential. It called for a phased roadmap focusing on urgent stabilization measures in the short term. The medium term should focus on institution building and diversification. The long term should aim for sustainable and inclusive development.
The report called for encouraging financial remittances and issuing bonds for expatriates. It recommended developing local value chains in agriculture, manufacturing, and renewable energy. It also suggested establishing economic zones and supporting entrepreneurship. The report noted Libya has large untapped mineral resources, including about 5 billion metric tons of iron ore. The country also has vast potential in solar and wind energy.
The report identified major obstacles to development. These include the private sector’s weak ability to create jobs and a skills gap from educational disruptions. It called for developing schools, building new facilities, and hiring qualified teachers. Curricula must be aligned with labor market needs.
About 30% of currency remains outside the banking system. The report also pointed to weak private equity investment and a stagnant insurance market. It stressed the need for comprehensive institutional reforms. These include improving governance, enhancing transparency, and modernizing financial laws.
The report concluded by emphasizing the need for a stable and transparent business environment. Maximizing economic returns from natural capital through sustainable practices is essential. This will support private sector-led growth and help build a green, sustainable economy.