The Libyan Economy

The Libyan economy depends almost entirely on the production of oil. The combination of very large oil reserves and a small population have actually made the country one of the richest in Africa, however this is somewhat misleading. Because of the high unemployment rate and the need to import almost everything they need the standard of living in Libya has remained quite low. There are a number of challenges facing Libya if they are to change this situation. The government is making efforts to address the problems but there is a long way to go before until they are solved. Until then the country will rely almost entirely on its oil to keep the economy going.

For many years Libya was a bit of an outcast with a number of embargos on the country that limited their ability to trade. This was because of allegations that the government supported terrorist activities. The embargo has since been dropped and Libya has started to make an effort to re-integrate with the rest of the world. They have made an effort to become major players in Africa and are even attempting to join the WTO. There is a lot of interest from foreign investors however the rules and red tape involved make this difficult. The government is going to have to address this problem and liberalize the economy if they want it to grow.

The biggest problem facing Libya is that besides oil it has almost no resources. There is very little arable land which makes them heavily dependent on imports of food. There is even a shortage of water in the country which has required a great deal of investment to address. This investment has required the government to maintain high taxes and limited the things they can spend money on. This has slowed economic growth.

Despite the fact that Libya has a fairly high per capita income most of the people are still quite poor. The main problem is a high rate of unemployment, especially among young people. Since the only industry is oil production the only people with jobs are the ones working in the oil patch. This is why the government so desperately wants to diversify the economy, in order to create jobs for the people. As it stands right now most of the income going into the country is going into just a few hands. This has naturally created some discontent.

The attempt to diversify the economy has come mainly in the manufacturing sector. The primary products they are manufacturing are petrochemicals. This is a smart approach since they are producing the oil they might as well process and refine it as well. This will not only add value to their exports but it will also add jobs. The downside of course is that it makes the economy even more dependent on oil. Eventually the oil will run out and that will cause some serious hardships for Libya.