Sovereign wealth fund and budget reserve account must be integrated into reforms - report
Libya's government needs to establish a governance framework with macro fiscal policy, whereby the North African country's sovereign wealth fund (SWF) and the budget reserve account at the central bank are integrated as part of key reform priorities in the post-revolutionary transition period, the International Monetary Fund (IMF) said.
The SWF, known as the Libyan Investment Authority (LIA), should be a "fund system with clear and rigid inflow and outflow rules", the Washington-based organisation said in a 62-page report released Tuesday. The fund needs to be "a dynamic and completely transparent and accountable system", it said, adding that it should be based on clear and regulated investment criteria.
"There should be no domestic currency investments which could adversely impact monetary policy," the IMF said, as well as no direct or indirect domestic investments that could lead to conflicts of interest and fragmentation of the budget. Outflows from the SWF system would only be to support the budget directly. All development spending would be through the state budget, it said.
Libya's economy was projected to grow 121.9 percent last year and growth is set to slow to 16.7 percent this year, according to the IMF. The North African country's economy contracted 60 percent in the 2011 rebellion that toppled the regime of Muammar Qaddafi. Libya's population of 6.5m people had a GDP per capita of US$5,510 in 2011. The recovery of Libya post revolution has been helped by a rebound in hydrocarbon production to pre-conflict levels of 2011.
As of June 2012, total hydrocarbon output reached more than 1.52m barrels per day, up from an average of 166,000 barrels per day during the conflict period in 2011, and is expected to increase to the pre-conflict level by 2013.
Security challenges and political uncertainty have made the transition process and macroeconomic stability more difficult.
Libya's wealth fund should be financed with "clear and rigid inflow and outflow rules", the IMF said, adding that it would "need to be a dynamic and completely transparent and accountable system". It said the country's budget reserve account and the LIA's portfolio could be merged to create a single system with two sub-portfolios.
The LIA, which has over US$50bn in assets, was set up by the Qaddafi regime in 2006 and oversaw and managed investments backed by oil wealth revenue in agriculture, real estate, infrastructure, oil and gas.