Economic reform under the Qadhafi regime has been limited, facing stiff resistance from vested interests, as some regime insiders have been reluctant to relax their control over large swathes of the state-dominated economy. However, there have been some privatisations and reforms. Large public stakes in the banks have been sold. A new preliminary banking licence has been issued to UniCredit, an Italian bank, and Bahrain-based Arab Banking Corporation (which is majority Libyan-owned) has purchased a 49% stake in Libya's Mediterranean Bank. A second foreign banking licence was due to be awarded in 2011, but this is unlikely to happen now. Bank lending to the private sector had been on the rise since 2007. The partial privatisation of two telecommunications companies and an iron and steel firm has been proposed, and the latter had been planning an initial public offering of shares. Prior to the eruption of violence, the government had been committed to streamlining the bureaucracy and was in the process of transferring 340,000 workers to the private sector. Ten new laws were introduced in 2010 to improve the business and investment environment, but were awaiting executive regulations when fighting broke out in mid-February.

The whims of Colonel Qadhafi created tremendous uncertainty in policymaking. During 2009-10 the government suspended visas for EU citizens living within the Schengen visa area and hinted that it might nationalise the hydrocarbons sector. Despite the award of dozens of oil exploration permits, drilling success has been limited and discoveries small. When exploration has been successful, development of the discoveries has been impeded. Four companies decided not to renew their exploration licences for a further five years in October 2009. In light of ongoing unrest, foreign companies have evacuated their employees and suspended operations. However, several large international oil companies-including OMV (Austria), Occidental, ConocoPhillips, Marathon and Hess (all US), Eni (Italy) and Suncor (formerly Petro Canada)-remain committed to Libya, having recently renegotiated their contracts for up to 30 years. UK-based BP has put plans to begin onshore exploration on hold, having previously delayed its deepwater exploration owing to safety concerns resulting from the oil spill in the Gulf of Mexico.

Should the opposition succeed in ousting Colonel Qadhafi, it is likely that a new government would introduce drastic changes to economic policy, increasing the pace of liberalisation and reform and eliminating excessive bureaucracy. The Transitional National Council has not formally outlined its future policies in this area except to say that it will endeavour to create "effective economic institutions to eradicate poverty and unemployment".