Tim Eaton
2. Medium- and long-term economic reform
Few oppose the view that Libya needs structural reforms to its system of economic governance. There are a series of potential reform goals that would be likely to generate widespread public support.
These include: the devolution of state powers to local government structures; development of the private sector; economic diversification; adaptation to the global energy transition; and climate action.
However, discussion of specific reforms requires moving from considerations of the vested interests of political elites to an approach that places the rights of Libyan citizens at the heart of governance. In practice – and drawing on lessons from Lebanon and Iraq – this means the abandonment of power-sharing as the operating principle of economic decision-making.
Achieving this will depend on a systematic programme of government action, the passage of new legislation and the mobilization of funding mechanisms beyond year-to-year budgetary allocations. The question is how this can be achieved under Libya’s current circumstances.
A range of policies could be pursued to these ends, though each brings different challenges. The simplest option would be to leave major decisions to a future, unified Libyan government. An alternative approach might be to address foundational elements of economic governance in a constitutional process.
Yet both of these options would risk delaying action, potentially indefinitely. Libyans are mindful of the experience of the current GNU, which entered office in March 2021 with a mandate to deliver elections six months later. At the time of writing, in November 2025, the GNU remains in place, no national-level elections have been held, and no significant economic reforms have been pursued.
A more effective means of initiating economic reforms could be through incremental changes, with each measure tied to the political process. One promising idea that has been floated is the establishment of an economic reform charter which any incoming government would be expected to endorse and commit to implementing.
The structured dialogue on the economy currently under development for UNSMIL could be the vehicle to develop this charter. This would provide a clear mandate and purpose for the structured dialogue.
Such a charter could earmark priority areas for action, such as administrative decentralization, private sector development, economic diversification, and climate change mitigation and adaptation. Importantly, the charter could identify programmatic actions for the next government to pursue.
Experience from reforms in Aceh and South Sudan underlines the importance of ensuring that programmatic elements consist of actions that state institutions have the capacity to deliver. It would be for the incoming government and the wider state apparatus to then formulate an implementation plan and carry the reforms out. International support should be mobilized for such an effort.
Critically, an economic reform charter would need to be endorsed by participants in the associated political process, and publicly endorsed by the incoming government prior to its entering office.
This would be necessary to ensure that technical proposals have a means of being implemented by the experts who have developed them. The international community would need to play a role in holding the future government accountable to its commitments. One practical way of doing this would be to deploy technical experts to the new government to facilitate their plans and retain a forum for sharing information on progress, such as through the EWG.
Such an approach would by no means be foolproof. There are many ways in which it could fail, yet an economic charter would at least provide a means of diluting the powers of an incoming government and reducing the winner-takes-all dynamics that have inhibited reform to date. It would also enable complicated economic issues to be addressed in a manageable fashion.
3. Capacity-building
Public finance management experts caution that Libyan officials and institutions lack sufficient capacity to implement a coherent and strategic programme of reforms. The provision of targeted institutional support via the World Bank, the International Monetary Fund and bilateral support packages should centre around the key deficits in economic governance identified in this paper. Addressing these deficits would probably need to be a focus of the economic charter described above.
4. Anti-corruption enforcement
Outside of these distinct efforts, the UN and its partners should continue to support the efforts of the Libyan state’s oversight bodies, most notably the Libyan Audit Bureau and National Anti-Corruption Commission, in promoting good governance and combating corruption.
In September 2025 these two agencies announced the launch of a joint strategy to combat key vectors of corruption. As corruption associated with elite capture of the Libyan state is often international in nature, partnerships between Libyan oversight bodies and investigators in other countries could strengthen anti-corruption efforts. Internationally supported enforcement could also constrain the behaviour of Libyan elites, many of whose members have developed a sense of impunity over their economic activities.
Violations of Libyan and international laws could be addressed via criminal justice mechanisms within Libya but also in other jurisdictions given the international nature of some of the activities.
Within Libya, the establishment of clear ‘rules of the game’ through the economic track would provide a mechanism for stronger anti-corruption measures. Sanctions issued by external states should be on the table as a possible punishment for individuals who are profiteering from Libya’s governance chaos. The UN Security Council’s sanctioning of an armed group commander, Ibrahim Jadhran, in 2018 for economic damage to the Libyan state is a helpful precedent in this regard.85
5. Public diplomacy
Finally, for these efforts to be successful, the UN and its partners must engage the Libyan public. Ordinary Libyans have long been excluded from discussions over the future of the country.
Successful engagement on the economic track, and on the political track for that matter, must mobilize public support by explaining the goals of the initiative and building momentum through expansive public diplomacy.
The UN and its international partners can help with this process, capitalizing on previous efforts such as the ESCWA-led socio-economic dialogue and the ongoing attempts of the Libyan Peace Makers group.
Last word: No option but to continue trying
There are many reasons why the suggestions in this paper for the development of an economic track, in conjunction with a wider political process, may fail. As noted, support from external states for a negotiated settlement to Libya’s ongoing conflict has waned considerably in recent years, with a number of countries focusing on building their political capital with existing office-holders to serve geopolitical and/or economic agendas.
The UN’s credibility has also suffered following repeated failures of its mediation attempts. However, this does not diminish the necessity of reaching a settlement.
Libya’s current trajectory is one of elite consolidation over the control of state resources, and of escalating misuse of state funds.
This is depleting the remaining capacities of state institutions, and perpetuating a level of public spending that cannot be sustained. Any outbreak of substantial conflict, or a significant fall in global oil prices, threatens to worsen the economic situation. Moreover, the problems of rent-seeking and economic predation associated with Libya’s current governance arrangements have left the country unequipped to tackle the challenges of the future in relation to the renewable energy transition, climate change and sustainable development.
Foreign states that are building their relationships and influence within this system can only be assured of short-term returns. A more robust state would offer a much-improved partner for Libyan’s foreign interlocutors.
***
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.
__________________
