What Libya’s 2026 Public Finances Reveal About the Libyan Economy

Almost 97% of the revenue reported by the Central Bank of Libya through August 2026 came from oil sales and oil royalties.

The figure captures a basic feature of the Libyan economy: activity outside oil can expand without materially changing the way the state itself is financed.

The Central Bank reported LYD 98.98 billion in revenue between January and August 2026. Oil sales generated LYD 80.8 billion and oil royalties another LYD 15.3 billion. Taxes contributed LYD 2 billion, while customs revenue amounted to just LYD 184 million. (Central Bank of Libya)

Oil sales and royalties therefore accounted for roughly 97% of reported state revenue.

That does not mean oil represents 97% of Libya’s entire economy. It means the government’s reported revenue base remains overwhelmingly dependent on hydrocarbons.

Oil still funds almost all of Libya’s reported state revenue

The composition of revenue tells more than the headline total.

Revenue source Jan–Aug 2026

Oil sales LYD 80.8bn

Oil royalties LYD 15.3bn

Taxes LYD 2.0bn

Customs LYD 184m

Telecommunications LYD 31.1m

Other revenue LYD 666m

Total LYD 98.98bn

Taxes and customs combined generated about LYD 2.18 billion. Oil sales and royalties generated LYD 96.1 billion.

That leaves public finances highly exposed to what happens in the oil sector.

A sustained production disruption can reduce the money available for salaries, subsidies, public services and government operations. Higher production or prices can improve revenue quickly, but they do not necessarily change the structure beneath it.

Strong oil income can therefore strengthen Libya’s fiscal position in the short term while leaving the underlying dependence intact.

A growing non-oil economy is not the same as fiscal diversification

There are clear signs of activity outside hydrocarbons.

The World Bank estimates that Libya’s economy grew by 13.4% in 2025. Oil GDP rose by 17.4%, while non-oil sectors expanded by 6.9%. For 2026, it projects overall growth of 4.5% and non-oil growth of 4.2%. (World Bank)

Those figures point to expansion beyond oil, but growth in non-oil sectors does not automatically diversify government revenue.

A food-processing plant adds to non-oil GDP. So does a logistics company, a private hospital, a construction project or a manufacturing facility.

Their effect on public finances depends on something else: whether that activity enters the formal economy and generates taxes, customs receipts, fees or other recurring state income.

Libya can therefore have a larger non-oil economy while its public finances remain heavily oil-dependent.

The latest CBL figures suggest that this is still the case.

The World Bank also estimates that the private sector accounts for only about 14% of Libya’s workforce. Public-sector employment remains dominant, limiting how quickly a broader private tax base can develop. (World Bank)

Expanding production outside oil is one part of diversification. Expanding the formal revenue base is another.

Where Libya’s public money is going

The expenditure side of the CBL statement shows how much of the state’s spending is tied to recurrent obligations.

Between January and August 2026, the Central Bank recorded total expenditure of LYD 68.61 billion.

Expenditure category Jan–Aug 2026

Salaries LYD 46.9bn

Goods and services LYD 9.0bn

Development LYD 912.8m

Subsidies LYD 11.8bn

Total LYD 68.61bn

Salaries made up the largest category by a wide margin.

There is an important qualification. The Central Bank says the LYD 46.9 billion salary figure does not include August salaries. It also notes that parts of the goods-and-services and subsidy chapters contain salary-related spending for some public entities and companies. (Central Bank of Libya)

The wage burden cannot therefore be measured simply by dividing the Chapter One figure by total spending.

Even with that caveat, payroll costs clearly occupy a central place in Libya’s fiscal system.

Recorded development expenditure was much smaller. Chapter Three spending reached LYD 912.8 million through August. (Central Bank of Libya)

That should not be read as the total value of investment taking place across Libya. It refers specifically to development expenditure recorded in the CBL statement.

The contrast still shows how heavily recorded public spending is weighted toward salaries, subsidies and operations rather than development expenditure.

The wage bill remains a structural fiscal issue

The International Monetary Fund has repeatedly identified Libya’s public wage bill as unusually large relative to the economy.

In its April 2026 assessment, IMF staff estimated the wage bill at around 30% of GDP and energy subsidies at roughly 20% of GDP. It argued that both need reform if Libya is to put public finances on a more sustainable path. (IMF)

The difficulty is that the wage bill is also deeply embedded in household incomes.

Oil revenue finances a large public sector, and public salaries support consumption across the economy. Cutting payroll spending quickly would therefore affect both employment and demand.

At the same time, allowing it to grow without restraint makes the state more expensive to finance.

The vulnerability becomes clearer when oil revenue falls.

Oil income can rise quickly when prices and production are favorable. Salaries are much harder to reduce when conditions worsen.

The IMF warned in April against using temporary oil windfalls to finance higher permanent spending, because those commitments remain after the extra revenue disappears. (IMF)

Why non-oil revenue remains so small

The revenue statement also shows how limited Libya’s non-oil public income remains.

Taxes generated LYD 2 billion through August.

Customs brought in LYD 184 million.

Telecommunications revenue contributed LYD 31.1 million.

Each is small beside the LYD 96.1 billion generated by oil sales and royalties.

Part of the explanation lies in Libya’s economic structure. A large public sector, a relatively small formal private sector, widespread informality and years of institutional fragmentation all limit the government’s ability to collect substantial revenue outside hydrocarbons.

The IMF has called for reforms to tax policy and administration, fewer exemptions and stronger customs and excise collection. (IMF)

Fiscal diversification does not require Libya to replace oil revenue with income taxes.

The more realistic goal is to build additional sources of public income so that the state is less exposed to a single commodity.

A larger formal private sector would help in several ways. It could broaden the tax base, increase customs and fee collection and reduce some of the economy’s dependence on public employment.

High oil revenue can hide fiscal weakness

Periods of strong oil income can make structural problems less visible.

When production or prices rise, government revenue improves quickly. Salaries, subsidies and other spending commitments become easier to finance.

The problem is that those commitments often remain after the windfall fades.

The IMF estimated Libya’s fiscal deficit at around 30% of GDP in 2025 and public debt at roughly 146% of GDP. It also linked high public spending to pressure on the exchange rate, international reserves and inflation. (IMF)

Higher oil revenue is clearly beneficial for a state that depends on oil. The risk comes from treating temporary income as permanent fiscal capacity.

Libya remains exposed to international prices, production disruptions and political disputes affecting energy infrastructure.

When almost all state revenue comes from hydrocarbons, those risks become fiscal risks as well.

What fiscal diversification would actually mean for Libya

Libya is unlikely to stop depending on oil any time soon.

The country has some of Africa’s largest hydrocarbon resources, and oil will remain central to exports and government revenue for the foreseeable future.

The more realistic question is how to reduce the degree of dependence.

That would require stronger tax and customs administration, a larger formal private sector and more disciplined public spending. It would also mean directing more public resources toward productive investment instead of allowing recurrent commitments to absorb an ever-larger share of revenue.

The IMF has recommended stronger non-oil revenue collection, tighter expenditure control and more disciplined investment planning. It has also called for a credible budget framework based on prudent oil-price assumptions. (IMF)

The World Bank makes a related argument from the private-sector side. It says Libya needs to reduce barriers facing businesses, improve access to credit and foreign exchange, reduce informality and limit the state’s heavy role across economic sectors. (World Bank)

A larger productive private sector would create jobs outside government and broaden the part of the economy from which the state can eventually collect non-oil revenue.

What the 2026 numbers tell us

Libya’s latest public-finance figures do not show an economy where nothing is changing outside oil.

They show that the fiscal system is changing much more slowly than the wider economy.

Non-oil sectors are growing, but the government is still overwhelmingly financed by hydrocarbons.

A factory can diversify GDP. A logistics company can add private employment. A food-processing plant can reduce import dependence.

None of those developments automatically changes how the state raises money.

That requires a broader formal private economy, stronger non-oil revenue collection and a gradual shift in the balance between recurrent spending and productive investment.

Through August 2026, roughly 97% of the revenue reported by the Central Bank of Libya came from oil sales and royalties.

Until that share falls materially, a major oil disruption or price shock will remain more than an energy story.

It will also be a fiscal event for the Libyan economy.