Libya's level of domestic credit continues to fluctuate in parallel with oil prices, as hydrocarbons revenue ebbs and flows through the economy. As oil prices picked up towards the end of 2009 and in early 2010, negative claims on central government increased, as the state deposited more cash with the banking system. In the third quarter, however, this trend reversed slightly, as the drop in oil prices in the second quarter fed through to government coffers. Nevertheless, government deposits in the country's banks, totalling LD78.6bn (US$62.2bn), remain at record levels, on account of the huge flows of oil revenue into the country in recent years. Such is the level of government deposits, which are equal to an extraordinary 99% of GDP, that they dwarf the level of lending in the country, ensuring that total domestic credit in Libya is also negative.

This highly anomalous situation is primarily a result of Libya's unsophisticated economy. The level of borrowing by the private sector, at LD8.6bn-some 11% of GDP-is paltry, indicating that the private sector in Libya is highly underdeveloped. (In neighbouring Tunisia, claims on the private sector account for more than 70% of GDP; in Jordan they represent more than 100%.) Even borrowing by state-owned enterprises, at LD11.6bn, is extremely limited. However, this most likely reflects the fact that state entities do not need to borrow since the government has so much spare cash. But the data also show that the economy is not sufficiently developed to soak up this level of funds, suggesting there is a dearth of administrative capability to manage the country's wealth.

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