"The short-term challenges are to manage the political transition, normalize the security situation, address severe institutional capacity constraints to ensure the timely compilation and dissemination of key statistics, and exercise budget discipline while maintaining macroeconomic stability.
"Over the medium term, the authorities should address a range of issues including institutional capacity building, improving the quality of education, rebuilding infrastructure, putting in place an efficient social safety net, developing the financial market, improving the management of the country’s resource wealth and associated financial flows with an efficient and transparent system, and reducing hydrocarbon dependency through private sector–led growth.
"A significant reduction in unemployment, which is largely structural, will require major changes in economic policies and institutions. Sustainable, employment-generating growth will require a business environment that is conducive to private-sector development with a focus on diversification of the economy to create employment opportunities in the private sector.
"Libya’s public finances and external current account remain vulnerable to a sustained decline in oil prices. Increases in recurrent expenditures pose risks to fiscal sustainability and is causing appreciation of the real exchange rate. In the medium term, necessary reconstruction and development spending will push the budget into deficit in the absence of a curb on current spending.
"With fiscal sustainability in mind, the government is seeking to contain current expenditures in the 2013 budget, but further steps are needed to limit current expenditure, in particular to contain increases in salaries and the number of public employees, as well as streamlining generalized subsidies. Plans are under elaboration for a subsidy reform strategy. The implementation of a national system for the identification of active civil servants should help to reduce the number of “ghost” workers in the civil service.