Libyan Central Banker Pins Revival Hopes on Higher Oil Output
Libya needs to boost oil output by almost 40% of its current level in order to cover its spending needs and begin revamping an economy battered by a decade of war, the OPEC nation’s central bank governor said.
With oil as Libya’s nearly sole source of income, “it is of course imperative that production rates in 2022 have to go higher,” Sadiq Al-Kabir said in an interview in the capital, Tripoli. The nation, which sits atop Africa’s largest proven crude reserves, is currently pumping 1.3 million barrels per day. Al-Kabir says daily output needs to climb to a daily 1.8 million barrels next year.
Such an increase would lift Libyan production to its highest since the reign of longtime leader Moammar Qaddafi, whose overthrow in a 2011 uprising triggered years of conflict. But the North African nation’s ability to do so is in question. The country is struggling with an aging infrastructure and cash problems further compounded by political tensions.
Those issues, along with a long-delayed budget, could imperil a target set by oil officials to reach 1.6 million barrels per day by the end of 2021. The country, while a member of OPEC, is exempt from the supply cuts that the cartel began early last year as the Coronavirus hammered demand for oil.
Upping production to 1.8 million barrels a day from its current level would ensure revenue of $35 billion next year if oil averages $60 per barrel, keeping Libya “on the safe side” and able to cover spending and reconstruction plans, he said.
The central bank is working closely with the Oil Ministry and National Oil Corp. and a budget surplus “is possible if the oil price remains stable and maintenance and modernization of NOC facilities continues,” Kabir said.
The bank expects oil revenue of $25 billion this year as crude production stabilizes amid a cease-fire. That’s a dramatic climb from $3.6 billion in 2020 when blockades caused by Libya’s conflict between rival eastern and western government forced facilities to close and output to plummet.
The conflict that raged for over half a decade between Libya’s rival governments meant that there were parallel institutions vying for control. A similar rift between the Tripoli-based central bank and its eastern counterpart hampered many facets of life in Libya.
The governor also said:
- He’s fully committed to unifying the central bank after an international audit is completed, and currently discussing a proposal to do so
- Covid-19 has had deflationary impact on the economy
- Libyan citizens and businesses now have greater currency security and simplified transactions after the unification of the exchange rates in January
- In the short and medium term, Libya doesn’t expect to resort to outside borrowing
- Libya’s total local debt is at a “very dangerous” level of more than 270% of GDP
- The central bank is currently working on the final stage of a plan to ensure that lenders continue to provide liquidity on a daily basis and with a high withdrawal ceiling
- The country’s gold reserves currently stand at approximately 116.6 tons
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