Will Libya unite over its newfound liquidity?

"After a difficult and turbulent time, there is hope," Mustafa Abu Braidaa, a shopkeeper in Tripoli, Libya, enthuses. "Of course, there are still challenges," he said. "Inflation, the currency is devalued and there are increases in costs. And yes, it's taking a long time for things to get better. But there have been positive changes and I think all this contributes to an improvement for people like me," the 32-year-old concludes optimistically.

Khadija Al-Buri, a 26-year-old nurse based in Tripoli, feels the same. "I'm worried that fighting could begin again, and there is lots of uncertainty and fogginess, but I do have hope for improvement," she says. "I think what we are seeing now is really raising people's spirits."

A nation divided

Libya has been split into two since 2014, with opposing governments located in the east and west of the country respectively. A United Nations-backed administration known as the Government of National Unity is based in Tripoli in the west, and its rival, known as the House of Representatives, is based in the east, in Tobruk. Each is supported by a number of local militias and foreign powers, and each has tried to wrest control from the other.

However, after several years of fighting and instability, the violence has largely subsided and most recently, it is the country's economic prognosis that has been getting all the attention.

Libya has the most oil deposits in Africa and last year earned $22 billion (€20.4 billion) in oil revenues as prices rose, thanks to shortages caused by the war in Ukraine. Oil prices jumped from around $41 (€38) a barrel on average over 2020, to just over $100 (€93) a barrel last year, according to numbers from the Organisation of Petroleum Exporting Countries.

All this meant that Libya's state budget was in the black in 2022, the World Bank has noted. And for 2023, the International Monetary Fund, or IMF, expects Libya "to top the list of growth for Arab countries with 17.9%", a monthly briefing published by Germany's Konrad Adenauer Foundation reported.

This kind of growth in gross domestic product, or GDP, is partially due to much lower numbers in previous years. But it is still a lot more than IMF forecasts for elsewhere in the region. For example, the Middle East's average predicted GDP growth for this year is about 2.7%.

But is all that good economic news actually having a meaningful impact on ordinary Libyans' lives?

Life is better, city residents say

There's a lot of new and very noticeable construction and infrastructure in places like Tripoli and Benghazi, confirms Claudia Gazzini, senior Libya analyst at the International Crisis Group think tank. "You have parks and roads that weren't there before, and there are some astounding shopping malls," says the expert, who was in Libya this month. "And by and large, that pleases many ordinary Libyans. When you're in Tripoli, you'll hear residents saying that day-to-day life is much better than it was two years ago. So there is no doubt that those who live in these big cities share some payback from all this recent economic activity."

Much of the current economic growth benefits the country's elite, however, as they are the ones dispensing the construction contracts and cash, Gazzini explains. "So the outlook for a major economic boost from which ordinary Libyans – especially those at lower levels of society – can benefit is still far away. It's easy to see the glitzy construction in Tripoli and Benghazi and even to some extent in Misrata, but what about those Libyans on the periphery, in smaller towns, the mountains and the desert?"

"The bottom line is that Libya could not have asked for better circumstances than [those that existed] in 2022 or, so far, in 2023," says political scientist Jalel Harchaoui, an associate fellow with UK-based think tank The Royal United Services Institute. Oil is pumping, and prices currently offer the country a good income.

Great to be back in Tripoli where there is a lot of reconstruction underway. pic.twitter.com/Gc869xyDQj

— Claudia Gazzini (@ClaudiaGazzini) May 7, 2023

And the population sharing that money is comparatively small, at about 7 million.

Real reconstruction?

"The population is not struggling with a Lebanon-type situation. The situation should, in theory, be satisfactory," said Harchaoui. But, he says, for many Libyans it is not.

As is the case in many countries dependent on oil revenues, almost three-quarters of Libya's labour force is employed by the government, and the public sector wage bill is only growing. Youth unemployment remains high, sitting at around 51% in 2022.

"What this means is that the income of the state is not actually benefitting its population," the Libya expert explained, referring to the lack of transparency in infrastructure projects and dubious, or even nefarious, motivations for some of the new development.

"For example, Egyptian companies were invited to build like a ring road near Tripoli," he continued. "It's very, very expensive and not particularly useful. It was all done to please Egypt from a political perspective. There was no transparency."

Similar concerns plague major reconstruction in downtown Benghazi, he says, where families who decided to remain in damaged homes are now being pushed out in a worrying trend to make room for new builds. "So what you have is reconstruction done in the interests of the elites," Harchaoui noted, "but not based on popular demand."

'Wheeling and dealing'

Despite all this, Libya's current economic development may also offer something of an opportunity, experts believe.

In July 2022, the Tripoli-based government agreed to appoint Farhat Bengadra, a former head of the country's central bank, to run Libya's all-important oil company, the National Oil Corporation.

Bengadra supports Khalifa Haftar, who effectively controls the eastern Tobruk-based government. The appointment came after several months of politically motivated blockades of fuel production facilities and ports that substantially reduced the country's oil output, and therefore its national income. Observers suggest that Bengadra got his new job as the result of a private agreement between the two opposing governments, one that seems to benefit both sides.

"Since this informal, transactional agreement was made last July, we've seen much wheeling and dealing between the two camps," the Crisis Group's Gazzini points out. "Both camps are receiving very profitable kickbacks in shady ways – it's all informal and involves individuals rather than institutions – but this transactional relationship is also keeping the peace on the ground. Because the actors involved have more interest in enabling these arrangements than in going to war with one another."

There have been calls for a general election in Libya for some time in the hopes that this would reunite the country under one democratic government. According to the United Nations' plans for the country, another attempt at a national vote should take place later this year.

"But elections are essentially a trigger for change," Gazzini notes. "And these deals between the former enemies are very profitable for both sides. So this [the profit sharing and economic growth] clearly rubs up against the UN-backed road map."

An immediate solution is difficult. Gazzini thinks formalising the informal "wheeling and dealing" could help bring Libyan politicians on board for an election. Harchaoui worries that the current situation, even if it brings some hope, is only cementing existing corruption and lack of transparency among Libya's political elites.

Only one thing seems to be clear, the experts agree: despite all the shopping malls and new roads, volatility remains the overriding factor in Libya, whether that's due to international oil prices or Libyan militias' infighting.

Cathrin Schaer & Islam Alatrash

© Deutsche Welle 2023