Libya’s economy is expected to be adversely affected by COVID-19 pandemic in 2020. The growth of real gross domestic product (GDP) of Libya is expected to shrink, unemployment level to increase and current account balance to remain negative due to COVID-19 this year. As of 27^th July 2020, Libya had 2,669 confirmed COVID-19 cases out of which 553 people have recovered from the disease while 60 have lost their lives.

In this blog post we will be focusing on economic impact of COVID-19 pandemic and policy measures of Libya government under following sections –

1. Impact of COVID-19 on Libya Economy in 2020

2. COVID-19 Containment Measures of Libya

3. COVID-19 Related Fiscal Policy Measures by Libya

1. Impact of COVID-19 on Libya Economy in 2020

Libya’s real gross domestic product (GDP) was LYD 26.588 billion in 2019 and due to COVID-19 outbreak it is estimated to decrease by 58.662% to be around LYD 10.991 billion in 2020.

Libya’s unemployment rate was 18.563% of total labor force in 2019. Due to slowdown in global economic activity due to COVID-19 pandemic the unemployment is expected to increase by 10.93% and reach 20.84% in 2020.

Libya’s current account balance in 2020 is expected to be at -6.584% of GDP compared to -0.298% of GDP in 2019. This means Libya will remain net borrower from rest of the world in 2020.

As of 24^th June 2020, the Libya government has taken following fiscal and containment policy measures to contain coronavirus (COVID-19) pandemic.

The COVID-19 response strategy for Libya was the joint approach of the humanitarian community to respond to the public health needs and immediate humanitarian consequences (both direct and indirect) of the pandemic across the country. It is guided by the Health Cluster’s Strategic Preparedness and Response Plan, published on 26 March 2020, which is designed to steer a coordinated effort in support of the Ministry of Health (MoH) and the overall efforts of the Government of Libya, and the 2020 Humanitarian Response Plan which outlines the prioritized humanitarian activities to address the severest needs of the most vulnerable people. This plan seeks to mobilize support to implement the most urgent and critical activities over the next three months.

The primary focus of the strategy continues to be prevention, preparedness and treatment of the Novel Coronavirus (COVID-19) outbreak and ensure that existing vulnerabilities are not exacerbated. In line with the Global HRP and the Libya HRP, the overall strategic priorities are:

1. Prevent spread of COVID-19 and reduce morbidity and mortality in Libya.
2. Decrease the deterioration of human assets and rights, social cohesion and livelihoods.
3. Protect, assist and advocate for IDPs, refugees, migrants, returnees and host communities particularly vulnerable to the pandemic.

2. Coronavirus (COVID-19) Containment Measures of Libya

Libya reported its first COVID-19 positive case in late-March as a man who had returned from a trip to Saudi Arabia via Tunisia. As of June 24, the Tripoli-based National Center for Disease Control (NCDC) reported that Libya has 639 positive COVID 19 patients, an increase of 155 cases (or nearly 32 percent) over the past week. The increase in cases is higher than in the previous week in absolute numbers and slightly lower in terms of percentage increase. The NCDC also reported that 17 patients have died from COVID 19 related complications thus far, an increase of 70 percent in just one week ago. While the number of positively identified Coronavirus cases and deaths have increased substantially in recent weeks, the true spread of the disease in Libya may still be understated because of restricted access to testing across the country and limitations in data compilation.

The NCDC continues to implement strict measures to contain the spread of the Coronavirus into and within Libya, but the fighting and migrating militias and civilians pose a challenge. The country’s borders have been closed, large public gatherings banned, and travel restrictions instituted, including between cities.

On 29^th March 2020, the Tripoli-based Government of National Accord (GNA) freed some 470 inmates from local and regional prisons to reduce the risk of COVID 19 infections in Libyan detention centers. On the same day it was announced that all court proceedings would be suspended until the end of April. The authorities in the Eastern region of the country have ordered a dusk-to-dawn curfew. In the week of April 6, they also reported their first positive COVID 19 case of a patient who had returned from travel to Tunis.

So far, the continued civil war has had a severe social and economic impact than COVID-19. Libya’s economy is contracting sharply because of the steep drop in oil prices and the collapse of oil production of more than 90 percent due to the conflict. Water supply to Tripoli and surrounding areas that was shut off in early April as a result of the ongoing fighting has since been restored.

The majority of cases are in Sebha municipality in the south, a major hub on the migration route from Africa to Europe.

Most of the 24 000 people displaced in recent weeks due to fighting are living in overcrowded conditions that allow for the easy spread of the virus. In addition, the country’s health system is near collapse, with three quarters of Primary Health Care Clinics not functioning due to shortages in medical staff, supplies, medicine, and equipment. These shortages have made it difficult to assess the true impact of COVID-19 on the population. With so few early detection sites functioning right now, infections can go undetected for weeks, allowing COVID-19 to spread easily within communities.

The combination of civil war and an accelerating pandemic could prove devastating. In response, the United Nations has renewed its calls for a ceasefire to address this extraordinary threat to the health and safety of the Libyan people. On this front there appears to be some initial progress with the resumption of ceasefire talks, which have come after forces loyal to Field Marshall Khalifa Haftar were pushed out of the important Al Watiya airbase in Western Libya and the outskirts of Tripoli. Meanwhile, fierce fighting continues in and around the central coastal city of Sirte between militias supporting the Government of National Accord (GNA) and Haftar’s forces.

3. Coronavirus (COVID-19) Related Fiscal Policy Measures by Libya

Overall fiscal measures

The Government of National Accord (GNA) announced a package of LYD 500 million (about 1 percent of GDP) in emergency COVID-19 related spending. While the exact nature and use of this spending is yet to be specified, it is believed to be aimed at supporting the health system in expanding testing and responding to a possible surge in infections. Certain medical equipment and personal protective gear are already in short supply as a result of the civil war which has impacted imports and impeded the free flow of goods within Libya’s borders. In an effort to protect declining reserves, in mid-April the GNA announced a 20 percent pay cut for civil servants.

Support to Small Businesses

Libya government agreed to raise the forex fee to 213 % of the official rate – thereby lifting the exchange rate to 4.4 LYD to the USD. The official exchange rate of 1.49 will be applied to a list of prioritized essential consumer goods.

Source – With inputs from Organisation for Economic Co-operation and Development (OECD), International Monetary Fund, World Bank, International Labour Organization (ILO) and Government of Libya