♠ Posted by Emmanuel in IMF,Middle East
at 2/25/2011 09:12:00 AM
This post is a follow-up to one I have just made on the reformist direction Libya was headed prior to the present crisis. In no small part due to Saif al-Islam Qadhafi's prodding, there were indications that the state was indeed normalizing itself as a market-based economy.From the last (meaning previous, one hopes) Article IV IMF consultation dated 9 February 2011, we gather a number of interesting factoids:
An ambitious program to privatize banks and develop the nascent financial sector is underway. Banks have been partially privatized, interest rates decontrolled, and competition encouraged. Ongoing efforts to restructure and modernize the CBL are underway with assistance from the Fund. Capital and financial markets, however, are still underdeveloped with a very limited role in the economy. There are no markets for government or private debt and the foreign exchange market is small.Call it Bretton Woods postcards from the edge. So the IMF observed two trends it welcomed in moving away from reliance on oil revenues for growth and towards private sector employment to provide work to a young population. I guess the speed at which it had moved towards both has not proven to be fast enough to outrace regional events:
Structural reforms in other areas have progressed. The passing in early 2010 of a number of far- reaching laws bodes well for fostering private sector development and attracting foreign direct investment. The success of the new laws, however, hinges on promoting inter-agency coordination and open consultation with the legal and business communities, and establishing permanent bodies to monitor, assess, and oversee implementation. A comprehensive civil service reform is needed to facilitate more effective wage and employment policies that would address the needs of a young and growing labor force.
Recent developments in neighboring Egypt and Tunisia have had limited economic impact on Libya so far [sure...whatever]. To counter the impact of higher global food prices, the government abolished, on January 16, taxes and custom duties on locally-produced and imported food products. Later in January, the government also announced the creation of a large multi-billion dollar fund for investment and local development that will focus on providing housing for the growing population.
Executive Directors agreed with the thrust of the staff appraisal. They welcomed Libya’s strong macroeconomic performance and the progress on enhancing the role of the private sector and supporting growth in the non-oil economy. The fiscal and external balances remain in substantial surplus and are expected to strengthen further over the medium term, and the outlook for Libya’s economy remains favorable. Directors saw as the main challenges the need to provide employment opportunities for a young and growing labor force, and the steadfast implementation of reforms to diversify the economy and reduce the high dependence on oil revenue.The entire text is not very long and is well worth reading for a glimpse of the Libya just before tumult engulfed the Gulf. The dry text aside, you can see why even the Washington-based pooh-bahs welcomed the direction it was heading. Again, how would you have helped normalize global relations with a pariah state but through commercial exchanges? The Qadhafi clan's siege mentality to recent events is a regrettable regression, though recent indications suggested that Libya was indeed headed in a different direction. Go ask the IMF.
Critics of those who sought to de-isolate Libya should remember that. To paraphrase a certain commercial, this was becoming less and less Moammar's country.
