The World Bank in Libya

The Libyan economy is driven by the oil and gas sector and remains undiversified, with a large public sector. In 2023, the oil and gas sector represented 60 percent of GDP, 94 percent of exports, and 97 percent of government revenues. The private sector remains underdeveloped but has significant growth potential and currently employs nearly 14 percent of the workforce.

While Libya is an upper middle-income country, its development indicators and institutional capacity do not match its income level. Years of conflicts and divisions have led to inadequate public investment and infrastructure maintenance despite the growing oil production, coupled with a distortive presence of the state in the economy and a restrained development of the private sector. Consequently, the population faces limited access to quality health services, a weak and outdated education system, disruption of the provision of safe drinking water, and disrupted electricity supply. Libya is considered one of the most water-scarce countries globally, with renewable water reserves of just 103m3 per person per year. The climate is arid, with 95 percent of the territory covered with desert and an arid coastal strip with agriculture heavily dependent on irrigation. The country has no rivers, and it is estimated that over 97 percent of freshwater is sourced from groundwater. The Great Man-Made River Project, Libya's engineered water line to the coastal areas, fails to reach critical water-scarce areas, resulting in recurring water shortages.

On September 10, 2023, a devastating natural disaster unfolded in eastern Libya when Storm Daniel wreaked havoc with heavy rains and fierce winds. These heavy rains led to the failure of two dams, releasing millions of cubic meters of water and resulting in extensive flooding in the coastal city of Derna, inhabited by approximately 100,000 people. The death toll reached 4,352, with more than 8,000 missing, 43,400 internally displaced, and approximately 250,000 people in need of humanitarian assistance. According to the Rapid Damage Needs Assessment (RDNA) jointly conducted by the World Bank, the United Nations, and the European Union published in January 2024, physical damage and losses caused by the storm and the flood are estimated at US$ 1.03 billion and US$ 0.62 billion, respectively, bringing the total estimated disaster effects to US$ 1.65 billion. Housing was the hardest hit sector, capturing 35 percent of total damages, followed by the environment (15 percent), transport (14 percent), and water and sanitation (13 percent). Flooding occurred in one of Libya's poorest regions, accentuating vulnerability across multiple dimensions.

Last Updated: Sep 20, 2024

The World Bank Group (WBG) is committed to continuing support to Libya with technical assistance and analytical services. The World Bank’s Board of Directors endorsed a new country strategy for the period 2023-2024 in February 2023. This Country Engagemeoknt Note (CEN) draws on the CEN for 2019-2021 and the WBG’s experiences in Libya over the last decade, as well as on experiences from other fragile transitional contexts, regionally and globally. The WBG’s program focuses on supporting Libya’s challenging transition process towards a sustainable future and provides analytical and advisory services that contribute to building transparent and effective country systems; inform local service delivery; and improve the country’s data and knowledge base.

The CEN’s objective is to support the development of Libya’s medium to long-term socio-economic vision. The WBG support is aligned towards helping Libya address its fragility challenges and move towards peace and political settlements over time. Fostering dialogue about challenges and choices while supporting some of the necessary preconditions for moving forward (data, institutional capacity, cooperation between local and national authorities, international coordination, etc.) is at the heart of the strategy. The CEN prioritizes activities that address drivers of conflict and support resilience.

The development of Libya’s private sector is critical for the country’s sustainable recovery and growth. The International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) have been increasing outreach to the Libyan private sector to identify opportunities to support sector development. Starting with a series of diagnostics, IFC activities include supporting the entrepreneurship ecosystem, improving access to finance with a focus on women and medium and small enterprises, and public-private partnerships. MIGA guarantees can play an important role in rebuilding the infrastructure once the political situation stabilizes. MIGA was active in Libya following the 2011 revolution but has no active exposure currently. Greater visibility over longer-term governance arrangements and improved security conditions could lead to MIGA support for projects in critical enabling sectors (such as energy and health) in the context of a WBG-wide engagement.

Last Updated: Sep 20, 2024

Current projects include:

• Building successful partnerships. Pooled funding and partnership platforms bring critical benefits for donor coordination and harmonization of objectives, joint leverage in policy dialogue and reform advocacy with government, impact, efficiency, shared risk management, funding predictability, and monitoring framework. Accordingly, the World Bank Group launched the Libya Development Trust Fund (LDTF) in December 2023 in partnership with the German and British Governments, with the overarching goal of providing a strategic alignment framework for the WBG and its development partners towards Libya’s development goals. The LDTF Umbrella program builds on the World Bank’s two decades of experience as a development partner for Libya and seeks to leverage its knowledge of the country’s past and current economic, sectoral, and contextual challenges. Given the country’s multifold challenges and limited capacity base, external support is essential to support a path towards sustainable development. This instrument draws on the Bank Group’s longstanding engagement in transition contexts, post-conflict reconstruction and recovery efforts, and its deep experience with financing mechanisms and partnership platforms across the globe, including in conflict environments. The LDTF’s main pillars are to support (1) reform and policy decisions and (2) a renewed social contract and service delivery.
• Giving a Voice to the Youth. With the current political divisions and institutional fragmentation, public debate around socio-economic issues is limited and excludes large portions of the population, mainly the youth. To address this, the LDTF partnered with Luiss Guido Carli University and the Mediterranean Universities Union in the launch of the Youth Economic Research Platform in June 2024. Its main objective is to provide an inclusive platform for young Libyans to contribute to the discussion of their country’s economic development trajectory. The platform supports the establishment of a network of young researchers who work on issues related to the Libyan economy.  Additional information on the program can be found here.
• Supporting Libya’s Public Financial Management (PFM) systems. In partnership with the Governments of the UK, the Netherlands, Switzerland, and the European Commission, the World Bank started its PFM engagement in January 2016.  Over the past eight years, the work enabled the World Bank to establish a strong working relationship with the Government of National Unity (GNU), as well as with technical public administration staff in the East, and of the Central Bank. The PFM engagement achieved two important objectives through technical assistance: (i) contributing to establishing the foundations of core government functions and processes and (ii) building trust between Libyan stakeholders and development partners. This engagement has contributed to a common understanding of institutions across the country and laid out critical reform steps.
• Facilitating inclusive dialogues on development challenges. As part of the World Bank’s regular publications, the bi-annual Libya Economic Monitor sheds light on economic development dynamics and challenges. As part of the consultation process, the World Bank team has been hosting regular dialogues with government officials, academics, representatives from civil society, private and banking sectors to discuss data, collaboration and contribute to the World Bank’s research agenda. In addition to its knowledge value, the consultations facilitate interactions and exchanges across participants from different regions and professional groupings. This rare opportunity creates space for stakeholders from across the country, including women and youth, to participate in economic discussions and contribute to Libya’s possible paths forward.
• Providing a multisectoral recovery strategy for flood-affected areas. Following the devastating floods that hit eastern Libya in September 2023, the World Bank developed, together with the European Union and the United Nations, the Libya Rapid Disaster and Needs Assessment (RDNA). The RDNA applied a global methodology to analyze damages and losses as well as recovery and reconstruction needs across all sectors of the economy. It estimated that the total reconstruction and recovery needs stand at around $1.8 billion and that the floods impacted nearly 22 percent of Libya’s population. The RDNA report was shared with stakeholders nationwide to inform the recovery and reconstruction process.

Last Updated: Sep 20, 2024