Business World

Wednesday 28 September 2016

Libya burns through cash while chaos halts exports

Feras Bosalum and Ulf Laessing

Published 06/05/2015 | 02:30

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CRUDE oil flows to Libya's Zueitina port stopped after protesters demanding jobs blocked a pipeline, forcing the closure of several eastern oilfields, oil officials said yesterday.

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State oil firm NOC confirmed the port closure, reported by Reuters on Monday, but did not specify the impact on production.

Libyan oil ports and oilfields regularly have to shut down due to protesters seizing them or armed groups fighting for control of the facilities.

The country burned through more than a quarter of its foreign currency reserves in 2014 to offset a fall in vital oil revenues and keep the country running, official data showed on Monday.

Central bank forex reserves were $76.6bn (€68.7bn) at the end of 2014 compared to $105.9bn a year earlier, the Libyan Audit Bureau said. The $29.2bn fall, to the lowest level for many years, suggests the OPEC producer may be edging closer to financial collapse.

A budget crisis has worsened following the closure in December of Libya's two biggest oil ports, Es Sider and Ras Lanuf, as factions allied to two governments fight for control four years after the ousting of Muammar Gaddafi.

More than a dozen oilfields have been shut this year, cutting oil output in the North African country to fewer than 500,000 barrels a day, one-third of levels in 2010.

Oil revenues fell 30pc to $14.6bn in 2014, also one-third of their 2010 levels.

Libya currently has two governments and two parliaments, each allied to former anti-Gaddafi rebels who are fighting each other, with the internationally recognised prime minister now based in the east after losing control of Tripoli last year.

That has created a power vacuum which Islamist militants are trying to exploit.

Neither parliament has published a budget for 2015, leaving the central bank in charge of Libya's finances. To limit spending, it pays only public salaries and subsidies.

But the sharp decline in foreign reserves nevertheless suggests that if current spending policies continue "the bank and the Libyan economy will collapse in less than two years", the Libyan Audit Bureau warned.

In its report, the bureau said the value of the central bank's foreign bond investments fell by 25pc last year, to $50.5bn.

The value of foreign currency deposits fell by 26pc to $25.3bn, suggesting the bank sold them to fund the budget, it said.

Libya traditionally posts budget surpluses but the loss of oil revenues resulted in a budget deficit in 2014, the report said.

Libya's budget is mainly made up of salaries for state employees and subsidies in place since the Gaddafi era that keep petrol, bread and other basic food items at low levels.

The addition to the public payroll of some anti-Gaddafi fighters since late 2011 means armed factions blamed for the destruction or seizure of oil facilities are state employees. REUTERS)

Irish Independent

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