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CommentMarch 1 2012

Libyans play economic waiting game

Amid the celebrations to mark the first anniversary of Libya's revolution, strong economic leadership of the country is yet to emerge.
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On February 17, 2012, Martyrs’ Square in Libya's capital city, Tripoli, played host to highly charged celebrations as hundreds of Libyans took to the streets to mark the first anniversary of the revolution that overthrew former dictator Muammar Gaddafi.

Men, women and children euphorically waved the new national flag amid a display of fireworks and marching bands. After an eight-month bloody civil war to free their country from 42 years of subjugation, the Libyan people are finally enjoying the taste of freedom.

But amid all the hope and optimism, the country now faces the huge task of kick-starting the economy – the IMF estimates that Libya’s GDP may have contracted by as much as 60% in 2011 – and building the ‘New Libya’.

The key challenge will be in transitioning from a hydrocarbon-dependent economy to a free market. Oil accounted for 98% of Libya’s GDP in 2010 according to the IMF.

Integral to this will be the development of a thriving private sector that was vehemently suppressed by the former regime, intimidated by the threat it posed to its power. It is estimated that the private sector share of GDP in Libya contributes at most 15%. 

Reorienting the economy will require deep institutional reform. The bloated public sector was riddled with corruption. Implementing a strong regulatory framework will ensure greater transparency and help usher in a new phase of modernisation. 

What is yet to emerge is a clear economic vision with strong leadership, and for this, the Libyans will have to be patient. General elections are scheduled to be held in Libya six months after a new constitution comes into force in the latter part of 2012.

The clear positive is that the country has no debt – Libya’s foreign assets are estimated to stand at around $160bn while annual government revenues exceed $45bn. No one doubts the country’s potential, but what is needed is a roadmap for the future.

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Read more about:  Analysis & opinion , Comment , Africa , Libya