Libya dependence on hydrocarbons makes it vulnerable - IMF

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Though its economy is recovering rapidly, Libya's dependence on hydrocarbons leaves the country vulnerable to the volatility of price fluctuations in the oil market, the International Monetary Fund (IMF) said. 

"While economic activity is recovering rapidly, the high degree of dependency on volatile hydrocarbon earnings makes economic performance vulnerable to oil shocks and complicates macroeconomic management," the Washington-based organisation said.

Hydrocarbons account for more 60 percent of the North African country's gross domestic product and 95 percent of revenue.  

"Although Libya can afford elevated levels of current expenditures in a transitional period, the high level of wages and subsidies, and a weak governance framework, may lead to an 'entitlement mentality' and undermine the prospects for fiscal sustainability and intergenerational equity," the IMF said.

The political transition, the restoration of stability and security situation, and fiscal consolidation are key challenges the government needs to address in the short term, it said. Authorities need to tackle institutional capacity building, improving the quality of education, rebuilding infrastructure, putting in place an efficient social safety net, financial market development, and reducing hydrocarbon dependency in the medium term.

Libya's economy is forecast to expand by about 16.7 percent this year after surging 121.9 percent in 2012. The North African country's economy contracted about 60 percent in 2011.

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Posted by: jon

all countries in the region depend on hydrocarbons, not just libya. why would they invest in solar only to export it? if they were to invest in it they would use it to free up some oil which in the end can be exported which would be more financially benefitual to the country then exporting electricity. other countries in the region are debating that issue but i don't think such a plan will take off. the magrib will be better off to keep the power that they generate from solar from their own use not to only free up oil as would be the case in libya and algeria but for the other countries morocco, tunisia, egypt won't rely too much on oil imports which is very costly.

Posted by: Red Snappa

Wouldn't Libya be an ideal environment in which to set up acres of solar power farms and export clean energy to Europe, or is the dust factor whipping up from the Sahara too great? Nevertheless, they're pursuing that route in other North African states.

This kind of initiative would have an effect on oil prices, but also hedge against hydrocarbon volatility.

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