AfDB Report Urges Reforms to Unlock Libya’s Growth, Mobilize Capital, and Diversify Economy

At its core, the report emphasizes the urgent need for domestic capital mobilization, deeper financial sector reforms, and innovative financing tools to unlock Libya’s economic potential.

The African Development Bank Group (AfDB) has released its 2025 Country Focus Report for Libya, titled “Making Libya’s Capital Work Better for its Development.” The publication provides one of the most detailed assessments to date of Libya’s macroeconomic trends, financial landscape, and prospects for long-term stability and growth. At its core, the report emphasizes the urgent need for domestic capital mobilization, deeper financial sector reforms, and innovative financing tools to unlock Libya’s economic potential.

A Data-Driven Blueprint for Libya’s Economic Renewal

The report outlines short-, medium-, and long-term policy options for policymakers, investors, and development partners. These recommendations aim to:

• Accelerate economic growth

• Strengthen capital mobilization

• Broaden revenue sources

• Support diversification beyond oil

• Promote inclusive and sustainable development

Designed as a practical roadmap, the publication provides timely economic insights to facilitate evidence-based decision-making.

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Economic Outlook: After Contraction, Strong Growth Expected

According to AfDB’s analysis:

• Libya’s economy contracted by 0.4% in 2024

• A strong rebound of 12.4% is projected for 2025

• Additional 4% growth is projected for 2026

These forecasts are driven primarily by expected improvements in oil production, which remains the backbone of Libya’s economy.

Despite recurring crises, political instability, and external shocks, the report highlights Libya’s vast development potential. Its strengths include:

• Significant reconstruction needs

• Abundant natural resources

• A strategic Mediterranean location

• Opportunities for economic diversification

• A young and capable population ready to participate in economic transformation

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Massive Investment Needed to Drive Transformation

To unlock this potential, the AfDB estimates that Libya requires annual investments of approximately $6.9 billion through 2063. This investment would support reforms, infrastructure rehabilitation, and sector diversification.

However, structural barriers continue to hinder economic momentum:

Key Constraints Identified

• Heavy dependence on oil revenues, exposing the economy to global price volatility

• Weak taxation system, limiting the government’s non-oil revenue base

• Underdeveloped financial sector, restricting credit and private-sector growth

• High levels of informality, undermining competitiveness

• Regulatory bottlenecks that deter investment

• Chronic underinvestment in strategic sectors, including agriculture, manufacturing, and logistics

The report stresses that tackling these constraints is crucial for restoring stability and building a resilient, diversified economy.

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AfDB: Libya Has the Assets for Prosperity—with the Right Reforms

Malinne Blomberg, Deputy Director General for North Africa and AfDB Country Manager for Libya, reaffirmed the Bank’s support:

“Libya’s untapped assets—its strategic location, natural wealth, and human capital—are pillars of long-term growth. With the right tools and partnerships, Libya can translate potential into measurable progress. The AfDB remains committed to fostering an enabling environment for reconstruction, diversification, and institutional reform.”

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Policy Recommendations: A Phased Reform Strategy

The report proposes a sequenced approach to reform:

Short-Term (Stabilization Phase)

• Improve resource management

• Strengthen transparency and accountability

• Enhance fiscal planning and public expenditure systems

Medium-Term (Diversification Phase)

• Promote private-sector participation

• Strengthen the regulatory environment

• Attract foreign and domestic investment

• Enact reforms that broaden economic activity beyond oil

Long-Term (Resilience Phase)

• Build a diversified and competitive economy

• Modernize the tax system and expand the revenue base

• Reinforce institutional and legal frameworks

• Develop inclusive markets supported by innovation and digitalization

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A Call for Stronger Development Partner Engagement

The AfDB urges bilateral and multilateral partners to intensify cooperation in Libya, especially in:

• Institutional capacity-building

• Governance reform

• Sustainable development investment

• Infrastructure rehabilitation

• Support for private-sector expansion

Collaborative action, the report stresses, is essential to catalyze Libya’s economic transformation and ensure long-term prosperity for its people.