Tim Eaton
Elite capture and shifts in economic
governance
More widely, these dynamics reflect the fact that the Libyan state is increasingly being captured by elite networks associated with a handful of leaders. It appears that some of these leaders have overseen a massive expansion of corruption that has been dubbed a ‘kleptocratic boom’.
The ever closer links between elite networks and the state have been particularly noticeable in the oil sector, where private Libyan and foreign companies alike have received significant contracts to sell oil on behalf of the Libyan state.
On the domestic side, one example is the emergence of Arkenu, a private Libyan firm believed to be controlled by vested interests connected to prominent political families, and noted by the UN Panel of Experts to be ‘indirectly controlled by Saddam Haftar’.
On the international front, meanwhile, Turkish and Emirati political influence appears relevant to the growing role of BGN in Libya’s oil sector. Such developments suggest that the consolidation of commercial influence also has an international dimension.
Indeed, the nature of international engagement with Libya’s state has shifted in recent years: where once there was multilateral consensus on the need for unified and stable governance, this shared understanding has given way to competition between foreign actors over spheres of influence and access to Libyan territory and resources.
Similar dynamics are visible in other sectors. In telecommunications, a new company, O3, has emerged with close links to Libya’s rulers. In the infrastructure sector, al-Aamar Holding Company offers a further such example.
These trends appear to indicate that where the private sector is replacing public companies, it may be doing so in concert with vested interests.
In short, a predatory political economy dominates Libya’s state landscape, with a number of vested interests extracting increasingly large amounts of funds from the state for little in return.
This trend has driven an expansion of state spending, albeit one that has been masked in the official figures because two major sources of spending are absent from the CBL’s figures. The first is the massive increases in fuel subsidies, data for which were removed from the CBL’s disclosures in November 2021.
If the CBL and Libyan Audit Bureau’s own estimates of fuel subsidy expenditure are factored in, an additional US$50 billion was spent between 2022 and 2024.
The second reason for the discrepancy between official data and actual fiscal outlays is that expenditures by the eastern-based authorities, made via their own financing mechanisms, are also excluded from the CBL’s figures.
The World Bank estimates that the government debt owed by the eastern authorities totalled LYD 71 billion (approximately US$65 billion) in 2014–20. In 2023, the eastern branch of the CBL engaged in monetary financing of around LYD 7.2 billion (US$1.5 billion) in support of the GNS.
Also in 2023, capital expenditure escalated significantly through the Haftar family-controlled Libyan Development and Reconstruction Fund; such spending reached LYD 59.1 billion (approximately US$12.3 billion) in 2024.
While these figures remain estimates, they provide a sense of the extent to which official figures under-report total state expenditures, indicating that in reality such expenditures may have climbed from US$18.5 billion in 2021 to an average of around US$45 billion a year in 2022–24.
In 2024, more funds appear to have been expended via the eastern authorities and fuel subsidies (LYD 154.5 billion) than outgoings reported via the CBL’s official channels (LYD 107.1 billion).
The impact of these shifts on Libya’s fiscal dynamics is striking. Based on the same calculations for expenditures as above, Libya’s true fiscal position – once off-book spending, etc. is accounted for – has moved from a surplus of around US$4.3 billion in 2021 to a deficit of over US$10.4 billion in 2024.
(This would equate to more than 22 per cent of GDP – a high, and unsustainable.) These problems are not just about unrecorded expenditure: deep concerns are also present on the revenue side. Between late 2021 and March 2025, the practice of fuel-for-crude swaps reshaped the flow of funds by removing the CBL from the financial process.
Previously, when crude oil had been sold internationally, the proceeds were routed first to the CBL and subsequently to the NOC to purchase fuel (via a budgetary process). But the scaling up of fuel swaps meant that the NOC obtained the fuel by directly swapping crude oil for it, leading to a significant reduction in revenues being transferred to the CBL.
The subsequent scaling up of fuel imports (as part of the fuel subsidy) by around 50 per cent is reported to have been connected to a surge in fuel smuggling.
The rise in public debt associated with these developments is driving inflation. Notably, the CBL has been increasing money supply via the creation of digital money that is not offset by a decrease in physical paper currency, a process described by some as reliance on ‘helicopter money’.
As a Libyan expert explains: ‘This approach effectively enables elites to erode citizens’ wealth through inflation, transferring economic costs to the public. If left unaddressed, this dynamic is likely to trigger serious social and political unrest in the future.’
Against this backdrop, the Libyan public is bearing the cost of currency devaluation. Official rates of inflation as measured by international financial institutions remain low (2.1 per cent in 2024, down from 2.4 per cent in 2023).
However, the margin between Libya’s official rates of exchange for the dinar to the US dollar and the parallel rate on the black market presents a different picture. The black market is in fact a better indicator of prices paid by Libyans for everyday goods and services, and thus a more reliable barometer of cost-of-living pressures.
A pattern in which prices have continued to rise until the CBL has intervened with devaluations and new policies. Yet, the trend remains clearly inflationary. Economists warn of a ticking time bomb over Libya’s public finances as the Libyan dinar loses its value.
Libya devalued the dinar in both 2020 (though the decision took effect in January 2021) and 2025, taking the official rate of exchange from LYD 1.22=US$1 in February 2011 to LYD 5.56=US$1 in April 2025. In the black market, a clear indicator of the true weakness of the currency, the exchange rate reached over LYD 7.5=US$1 at the time of writing, in November 2025.
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Tim Eaton is a senior research fellow in the Middle East and North Africa Programme at Chatham House. His research focuses on the political economy of conflict in the Middle East and North Africa (MENA) region, and on the political economy of the Libyan conflict in particular.
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