Country Report - Zawya

12 Libya
Spending constraints lead to
larger budget surplus
NOC claims large rise
in reserves
another". South Korean companies have heavily invested in Libya and have
carried out a huge amount of construction work for a number of years. It is
therefore important for them to establish Libya's probable policy direction and
who is likely to succeed Colonel Qadhafi.
Economic policy
The government has released provisional budget data for 2009, which show
that expenditure was lower than expected. Administrative expenditure fell by
10% from 2008 to LD14bn (US$11bn), and development expenditure fell by 39%
to LD18bn. However, a new category of "other expenditure" was included,
which totalled LD8.9bn. Assuming previously announced government capital
expenditure plans are correct, this should be included as part of capital
expenditure, which, in this case would total LD27bn.
Meanwhile, revenue was broadly in line with expectations. Oil revenue fell by
45% from 2008 to LD35bn, which was 80% of total revenue, down from 88% in
2008. These developments were a consequence of lower average oil prices.
Non-oil revenue increased by 7.9% to LD9bn as a result of a higher tax take. The
increase was primarily due to an increase of LD651m (US$509m) in customs tax
revenue. Although the government has tended to cut tariffs in recent years, an
increase in services import tax from 4% to 10% and also increases in
consumption taxes on imported products in 2009 are probably responsible for
this. In total, the budget was LD4bn, or 4.6% of GDP, in surplus, considerably
lower than the LD28bn (24% of GDP) in 2008 as a result of lower oil revenue.
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Public finances
(LD m)
Budget revenue
2005
06
Budget expenditure
Sources: Central Bank of Libya; Economist Intelligence Unit forecasts.
Budget balance
Country Report August 2010 www.eiu.com © The Economist Intelligence Unit Limited 2010
07
According to the head of the NOC, Mr Ghanem, oil companies met with
considerable success during 2009 and the first half of 2010 in their
hydrocarbons exploration efforts. Mr Ghanem claimed in early August that of
the 65 new wells drilled last year, the NOC, in concert with international oil
companies (IOCs), found recoverable reserves of either oil or gas in 51% of
them. As a result, the country's oil reserves rose by 653m barrels, which was
more than total production in 2009 of around 566m barrels. Mr Ghanem also
claimed that gas reserves had increased by 782bn cu ft. Libya's exploration
programme has seemingly had even greater success over the first six months of
08
09
10
11