"The pegged exchange rate regime will remain the policy anchor, thanks to ample foreign exchange reserves that preserve confidence in the currency, and fiscal and monetary policies need to be supportive of the peg. A credible fiscal policy anchor would delink the economy from world oil price fluctuations, improve the management of resource wealth, and safeguard macroeconomic stability. The adoption of a well-designed fiscal policy rule would help keep in check pressures on government spending and improve the management of oil price cycles.
"Efforts are needed to develop a vibrant financial sector that caters to the needs of the economy. Structural reforms are required for the development of a growth-enhancing financial system, particularly reforms to the operation of state owned institutions and a winding down of non-commercial activities. The streamlining of regulation while strengthening the supervisory framework will be important to promote financial intermediation.
"Libya’s Anti-Money Laundering and the Combating the Financing of Terrorism (AML/CFT) law needs to be brought in line with international standards, and resources should be devoted to its effective implementation. Financial sector development should be accompanied by strengthening AML/CFT supervision to ensure compliance. Adequate preventive measures and reporting to an independent and operational Financial Intelligence Unit will help limit destabilization from illicit financial flows.
"A comprehensive reform strategy to improve the public financial management (PFM) system will be critical to improve accountability and transparency. The thrust of PFM measures in the near term should be to address key priorities with a view to building the institutional capacity for more fundamental reforms. In this connection, Libya’s sovereign wealth fund system, operating through the Libya Investment Authority, the budget reserve account at the central bank and other funds, should be fully integrated into the fiscal framework, with well-defined and transparent rules.
"To help build capacity, the authorities and the IMF have agreed on a comprehensive technical assistance program. Data compilation remains weak and responsibilities are spread over several agencies. The authorities are keen to improve data compilation and transparency, but they need international assistance to formulate and implement a comprehensive strategy.
"The team is grateful to its interlocutors for open and constructive discussions."