Our quick round-up of the main trends that defined the last 12 months, and a look ahead to 2017 (free to access).

 

The Libya Monitor wishes all of its clients and readers a happy festive season, and all the best for next year.

 

We thank you for your support in 2016, which in many ways has been a frustrating year for Libya, one that promised much but overall failed to deliver – despite some bright spots and signs of hope for the future.

 

 

Libya began the year with falling levels of crude output, which was initially around 400,000 bpd and then dropped further, plumbing a nadir of under 200,000 bpd in early September. That is just one-eighth of the output being produced in 2010.

 

In mid-September, armed groups loyal to Khalifa Haftar and the eastern-based authorities made a move to retake control of the oil ports in central Libya that had been closed for several years by Ibrahim Jadhran’s group. Relatively soon afterwards, force majeure was lifted and exports jumped, with output hitting around 600,000 bpd by December.

 

At the time of writing in late December, the pipelines leading from key south-west oil fields to the coast have, apparently, finally been unblocked, potentially leading to another big output boost in the coming weeks. Es Sider has reopened, and the NOC’s target of reaching 900,000 bpd by the end of the year is not looking as unrealistic as it was a few months ago.

 

As ever, this comes with a caveat: there have been many false dawns around plans to boost output. But on balance, the situation looks more promising at the end of 2016 than it did at the start, and a pick-up in oil revenues would at least allow more money to be thrown at the array of other problems in the country. The NOC reckons that reopening the pipelines would add about $4.5bn to revenues next year.

 

 

In February the Presidential Council created a new government which was meant to reunify the country under a single authority, with the backing of the international community.

 

The move raised hopes, perhaps overambitious ones, that some degree of order and organisation might be restored, at least in part of the country.

 

In March the GNA sailed (literally) into Tripoli, to be based from a small naval base near the port, and it is a measure of its lack of progress that as of December that remains one of the few pockets of territory it can claim to control directly.

 

The GNA was rejected by the Tobruq-based House of Representatives (HoR), which claims it is an illegitimate body, while the former Government of National Salvation – which was supposed to have been superseded by the GNA – decided to retake control of key government buildings several months ago, leading to yet more confusion about who actually runs what on the ground.

 

To cut a long story short, 2016 has seen a further deepening of the centralised power void since 2011, and more fragmentation into a structure whereby armed groups in localised areas – often with no affiliation to any of the self-proclaimed governments – run the show. The longer this goes on, the harder it will be to unravel.

 

 

Banks have continued to suffer severe shortages of physical cash this year for a number of reasons, partly the quantity of money being held outside the formal banking system. Throughout the year the Tripoli-based Central Bank of Libya (CBL) has been receiving shipments of banknotes printed in the UK, while the Bayda-based has been getting the same from Russia, essentially creating a strange dual-currency situation and wars of words between the two entities.

 

Many commercial banks have been closing down branches because they simply have no cash, and as of December most still impose strict withdrawal limits ranging between LD300-1,000 per month.

 

 

In even more short supply has been foreign currency, largely due to the drying up of oil revenues. As a result the black market has thrived, the dinar has plunged and the spread between the official CBL rates and the “real” ones has widened even further.

 

In March the dinar was worth around LD4 to the dollar on the parallel market, compared to LD1.25 prior to the 2011 revolution. By December it was worth about LD6.5, with the official CBL rate at LD1.4.

 

There have been calls for the CBL to formally devalue the dinar – as neighbouring Egypt has done so dramatically this year – but these have so far been resisted.

 

 

Currency depreciation is one of the reasons behind this year’s soaring inflation, with Libya reliant on imports for the majority of its consumption. The latest CBL data – whose methodology and accuracy is unclear – estimated that price jumped around 25% in the first half of 2016, far above the 10% average posted in 2015 and just 2.4% in 2014.

 

Food prices have climbed at above the average rate throughout the year, likely related to shortages in basic foodstuffs and difficulties with imports.

 

Meanwhile, state subsidies on certain key products, most notably fuel, have continued to remain in place and have effectively masked the true scale of inflation, were market forces allowed to run their course.

 

 

It has not been a good year for the power sector, which continued to suffer from a potent combination of regular attacks, vandalism and theft, as well as fuel shortages and a lack of funds and parts to carry out maintenance work.

 

Units at numerous power plants are regularly disconnected for various reasons, and power cuts have been depressingly regular in many parts of the country - and essentially now a grim fact of life for many people.

 

On the bright side, progress was made at the Khoms power plant, while there have been signs that Turkey’s Enka could return to complete its work on the Ubari plant, near Sebha in southern Libya. That will likely be dependent on the security situation, and the financial terms in place.

 

 

The departure of foreign staff in the health sector over the past few years, the lack of funds to purchase medical equipment and supplies, and ongoing security concerns have all contributed to a continued deterioration in Libya’s health provision this year, with often tragic results.

 

Hospitals are not able to operate properly, if at all, with many at risk of shutting down completely. There have been numerous cases of preventable deaths this year, some involving newborn babies, because basic health provision has been absent.

 

The country is becoming increasingly reliant on medical aid deliveries from overseas, but even these programmes are not sufficient to meet needs. On 1 November the World Health Organisation (WHO) said that requirements of $37m by the health component of the Libya Humanitarian Response Plan were only 23% funded.

 

 

Mirroring the government debacle is the ongoing dispute over who runs the $67bn Libyan Investment Authority (LIA), which is now effectively Libya's single-wealthiest organisation.

 

In August the GNA appointed a new interim committee to manage the LIA, naming Hassan Mohamed as chairman, without mentioning the two existing claimants to the chairmanship, the Tripoli-based Abdulmajid Breish and the eastern-affiliated Hassan Bouhadi.

 

To complicate matters further, the eastern authorities replaced Bouhadi with Fawzi Ferkash, then raised a lawsuit against the former in December, claiming he was pretending to still be the head of the authority from its offices in Malta. It is not clear who has effective control on the ground, and in some ways the point is moot because almost all the LIA’s overseas assets remain frozen.

 

Meanwhile, the LIA lost its high-profile $1.2bn lawsuit against Goldman Sachs, whom it accused of misleading the fund over several enormous loss-making trades at the height of the financial crisis. The case was closely-watched by the international media, and may shape the LIA’s other upcoming lawsuits (see below).

 

 

Bilateral trade with Libya’s main partners shrank further this year, based on what limited data is available.

 

In the first eleven months of 2016, goods imports from Tunisia fell by 9.7% year-on-year, with continued disruption at the Ras Jedir border crossing.

 

Imports from Italy were down 58% year-on-year in the first three quarters, while during the same period Turkish exports to Libya were about 40% lower than the same period in 2015.

 

While not necessarily Libya’s largest trade relationship, Turkish trade has been interesting to track as it mirrored the initial post-revolution boom, reaching record levels in 2012 and 2013, before falling off in parallel with the political and economic mess in Libya.

 

 

Armed groups linked to the Government of National Accord (GNA), with the help of US air support, managed to take control of the strategic coastal city earlier this month. Sirte had effectively been taken over by Islamic State (IS)-affiliated groups since 2015.

 

However the city has been severely damaged by the fighting, with vast numbers of displaced residents and a major programme of reconstruction required.

 

The UN said that its “Sirte Flash Appeal 2016”, which asked for $10.7m to provide assistance to the city, had only received $500,000 by mid-December.

 

 

Oil output. Will the breakthroughs achieved in late 2016 be sustained? If so, production could go back to around 1.1-1.2 million bod next year. But the fragile, unpredictable dynamics involved could easily see it fall back again. What happens with oil is the single-biggest factor in shaping Libya’s prospects, whether economic, political or social.

 

LIA lawsuits. The fund’s lawsuit against France’s Société Générale (SocGen) is scheduled to begin in January. The LIA has also said it will appeal the ruling of London’s high court in the $1.2bn case against Goldman Sachs.

 

Tripoli International Airport: How much progress will be made on rebuilding the facility? Overlapping schemes appear to have been proposed for the site, and are mired in political and security issues.

 

Government. As of December the Presidential Council was still thought to be in talks to form a new cabinet to present to the HoR. The timelines on this are unclear, as is whether it will make any actual difference to the situation on the groun. But forming some kind of genuine unity government would at least be a start.

 

Embassy restarts? Many countries promised to reopen their embassies after the arrival of the GNA in Tripoli, but none did. There are signs this could happen in early 2017, which would be a vote of confidence in the country, but security concerns will ultimately dictate any moves.

 

 

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