Outlook for 2011-15

• Political power will remain vested in the Libyan leader, Muammar Qadhafi. Libya will retain its unique jamahiriya (republic of the people) system, but the structures of government will undergo halting reform.
• There are signs that the regime fears contagion from political events in neighbouring countries. It will adopt measures to prevent or suppress any domestic uprisings.
• Popular demonstrations against dynastic succession in Egypt are likely to influence Colonel Qadhafi's plans to hand over power to one of his sons. Saif al-Islam Qadhafi has long been considered his most likely successor.
• Relations with the US and the EU will be subject to periodic bouts of tension, despite the resolution of the Lockerbie affair and the scrapping of Libya's weapons of mass destruction programme.
• The hydrocarbons sector will dominate the economy, but non-oil growth will be strong. However, the government's inconsistent and unwelcoming policies risk deterring international oil companies and other investors.
• We forecast that real GDP growth will average 3.8% in 2011-15. Oil output is likely to rise modestly alongside strong growth in the non-oil sector.
• In line with international food and non-oil commodity prices, inflation will spike in 2011, reaching 4%, before flattening out at an average of 3% in 2012-15.
• The current account will reflect trends in international oil prices, which determine export values. The surplus will widen to 24.2% of GDP in 2011, before narrowing to 12.1% of GDP in 2015.

Monthly review

• Colonel Qadhafi has condemned the popular uprising in Tunisia, expressing his support for the former president, Zine el-Abidine Ben Ali.
• Fearing a possible spillover from Tunisia, Colonel Qadhafi formed a crisis management team and removed taxes on food products. Meanwhile, protestors occupied homes under construction in Bani Walid and Benghazi.
• The US has recalled its ambassador to Washington after US embassy cables referring to Colonel Qadhafi, which were released by WikiLeaks, a whistle-blowing website, compromised his position in Libya.
• Libya's Privatisation and Investment Board has announced that the initial public offerings of Libya's two telecommunications companies, Libyana and Al Madar, will go ahead before the end of April.
• Government deposits in Libyan banks amounted to LD78.6bn (US$62.2bn) in the third quarter, the equivalent of 99% of GDP.

The Libyan leader, Muammar Qadhafi, has ruthlessly repressed political dissent, and there are now few real domestic threats to his rule. However, there are indications that the regime is concerned political turmoil in Tunisia and Egypt could spill over into Libya. Home to a young disaffected population and experiencing high unemployment, Libya faces some of the same threats to stability as its neighbours. The prominence of opposition to dynastic succession in the Egyptian revolution in particular now makes the prospect that Colonel Qadhafi will hand power to one of his children less likely. There is no agreed process for the transfer of power, but Colonel Qadhafi's tacit support for a number of reforms proposed by his son, Saif al-Islam Qadhafi, has made him the most likely successor. Saif al-Islam faces considerable resistance from conservatives within the regime. He has long been in favour of creating a formal constitution and of implementing administrative and market-oriented reform. Other possible successors include one of Colonel Qadhafi's other six children. Many Libyans would deeply resent an orchestrated dynastic arrangement, and someone may emerge from within the political elite. Competing claims on power could lead to a period of instability immediately after Colonel Qadhafi's departure. However, the succession is unlikely to become a pressing issue while Colonel Qadhafi retains power, which he is expected to do throughout the forecast period. Hereditary succession has been a focal point of anti-regime demonstrations in Egypt and Tunisia, and Colonel Qadhafi could come up against strong opposition to his plans as a result.

Significant political reform is unlikely. Colonel Qadhafi remains wedded to Libya's opaque and ineffective jamahiriya (republic of the people) system and continues to manipulate its structure to maintain the illusion of democracy-as demonstrated in 2009 by the apparent rejection by the local-level Basic People's Congresses (BPCs) and the General People's Congress (GPC, akin to a national parliament) of the Wealth Distribution Programme. The Libyan leader will continue to deny any individual minister the opportunity to build a personal power base. He will also be careful to balance the interests of reformers against those of the old guard.

There is at present little immediate threat to the ruling elite. However, if the socioeconomic environment were to deteriorate through, for example, rising unemployment, collapsing oil prices or growing inequality, the government could face increasing unrest similar to that seen in Tunisia and Egypt. Feelings of political exclusion have been exacerbated by the disruption of Libya's independent media. However, with the economy expected to remain relatively strong and the opposition, with the exception of domestic Islamists, either in exile or lacking clout and coherence, the prospect of any threat to the regime appears limited.

The greatest fear for the authorities remains the challenge from militant Islamist groups, which have been responsible for assassination attempts against Colonel Qadhafi. There are also regionwide concerns over the threat posed by al-Qaida affiliates. Reconciliation and rehabilitation negotiations have proceeded secretly, and a steady stream of Islamists has been released from prison in recent months, including 39 from the Libyan Islamic Fighting Group, the largest local militant organisation, which recently renounced violence. This suggests that the local militant Islamist threat is declining.

Libya's political structure is based on 600 BPCs, which include everyone over the age of 18. The BPCs vote annually on representatives to the GPC and also on major decisions. However, key government officials are appointed by the prime minister, who is appointed by Colonel Qadhafi. There is little transparency in voting processes. Saif al-Islam's proposed constitution includes greater powers for elected representatives. His ideas are increasingly being adopted by his father, and there is therefore some potential for more meaningful elections to be introduced late in the forecast period.

Foreign relations will generally improve now that Libya has been reintegrated into the international community after renouncing its weapons of mass destruction programme and reaching settlements over past involvement with terrorism. Nonetheless, the Libyan government is likely to remain embroiled in disagreements with various countries, although the majority of these will have no serious consequences. A dispute with Switzerland, sparked by the arrest of a son of Colonel Qadhafi in Geneva in 2008 for allegedly mistreating a maid, seriously damaged commercial and diplomatic relations and also threatened Libyan relations with the EU, although it has now been resolved. Libya's past involvement in terrorist activities will continue to resurface, souring international relations. The case of BP, a British oil major, which has been accused by US senators of lobbying for the release of the man convicted of the Lockerbie bombing, is an example. After much wrangling, a deal has finally been reached over co-operation on immigration between the EU and Libya, which should clear the way for an improvement in relations across a broad range of political and economic issues. Colonel Qadhafi will continue to seek to strengthen ties with the US and the EU, particularly Italy, while sporadically voicing anti-Western rhetoric and engaging with countries viewed as rivals of the US, such as Russia and China.

Efforts to integrate Libya into the international community will continue, and the country was recently elected to the UN Human Rights Council, although not without strong protests from human rights campaigners. Generally, economic imperatives, mainly in the oil and gas sectors, are likely to dictate relations with the West. Libya will also continue to have tense relations with a number of Arab states. Colonel Qadhafi's recent open support for the former Tunisian president, Zine el-Abidine Ben Ali, may exacerbate regional tensions further. Poor ties with Arab states have encouraged Libya to focus on ambitions to lead Africa towards continental unity.

Economic reform has been limited and is likely to remain so, despite recent proposals to liberalise the economy and privatise state companies. Saif al-Islam does appear to have been given a mandate for some reform. But, even if he is able to establish himself and implement his vision for economic development, it will take considerable time to carry this out. Any reform will face stiff resistance from vested interests, as some regime insiders are reluctant to relax their control over large swathes of the state-dominated economy-which has slowed progress on increasing private-sector and foreign-investor participation.

However, there have been some privatisations and reforms. Large public stakes in the banks have been sold, with more to follow, a new preliminary banking licence has been issued to UniCredit, an Italian bank, Bahrain's Arab Banking Corporation has purchased a 49% stake in Libya's Mediterranean Bank, and a second foreign banking licence is expected to be awarded in 2011. In conjunction with technical assistance from international organisations, this will help to modernise the sector. Bank lending to the private sector has increased significantly since 2007 and is set to continue to expand, which will help the small private sector to grow. The partial privatisation of two telecommunications companies and an iron and steel firm has been proposed, and the latter has planned an initial public offering of shares. The government is also committed to streamlining the bureaucracy and is 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 they are awaiting executive regulations to clarify how they will be implemented.

The whims of Colonel Qadhafi will continue to create 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. This has dented the positive perceptions of investing in Libya's hydrocarbons sector and its entire economy more generally. Contractors regularly complain of delayed payments, and investment in Libya is widely regarded as a long-term commitment with large downside risks, driving up the rewards that investors will require. Foreign investment, which is vital for development, is therefore likely to become harder and more expensive for Libya to obtain, and more major foreign oil companies may leave-particularly as a number of exploration permits lapse this year. BP has confirmed its intention to proceed with its own major exploration programme, although its deepwater exploration has been delayed, which could be related to safety concerns resulting from the oil spill in the Gulf of Mexico.

The government is implementing public investment programmes to help to provide a foundation for economic development and to create jobs. Most of these programmes focus on major infrastructure developments in the power, desalination, transport and communication sectors. However, progress has been and is likely to continue to be slow, mainly owing to bureaucratic delays.

The government has usually had a healthy budget surplus in recent years owing to high oil revenue and a tendency not to fulfil its spending commitments. The Economist Intelligence Unit estimates that the 2010 surplus was 8.9% of GDP, well below the average of 21.5% in 2006-09, mainly owing to increased spending. Current expenditure is being driven higher as efforts to cut the size of the civil service have been delayed, a public-sector pay rise is planned and subsidies will be kept in place to control consumer prices. In 2011-15 oil prices will remain relatively high at an average of US$80.4/barrel. However, this will not be high enough to give the government confidence to increase significantly capital expenditure, which will therefore remain relatively stagnant. The upshot will be an increase in the budget surplus to 13.5% of GDP in 2011. This will fall slightly before rising again to 14.5% of GDP in 2015 as oil prices follow a similar trend.

The currency is pegged to the IMF's special drawing rights (SDR), which restricts monetary policy flexibility. Nonetheless, the Central Bank of Libya cut benchmark interest rates by 2 percentage points in early 2009 and increased them back to 5% in early 2010. Pressure on the Central Bank to overhaul its approach to monetary policy and regulation of financial services is likely to increase as the banking sector is liberalised. Liquidity is excessive, and state-subsidised credit institutions are currently crowding out commercial bank lending. Efforts will be made to address these issues and there should be some improvements by the end of the forecast period. Possible reforms include fully liberalising interest rates, issuing Central Bank bills and allowing commercial banks to issue certificates of deposit.

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We estimate that Libyan real GDP expanded by 3.3% in 2010. This is well below potential and suggests that growth is being limited by structural constraints, such as the inefficiency of the bureaucracy. We therefore forecast that real GDP growth will remain relatively weak, rising to 3.6% in 2011 and 4.1% in 2012. Economic growth is primarily determined by oil production and export volumes, and we expect only small increases in demand for Libyan oil. Libya primarily supplies Western, developed nations, where consumption is in decline, and may struggle to open up new supply lines to emerging Asian markets. OPEC quotas will also limit production, and we expect few reforms to be implemented to tackle structural constraints until there is a new leadership in place, which remains unlikely during the forecast period. Furthermore, although development work and new oil exploration will be carried out in an attempt to boost production capacity, these steps are only likely to move forward slowly. We therefore expect growth to slow in 2013-15, when it will average 3.7%. Investment and imports related to oil and gas developments will grow relatively strongly in 2011-15, provided that international oil companies are not significantly deterred by the recent threats to nationalise foreign oil operations or by subsequent regulations that aim to give the Libyan government greater control over the development of the country's hydrocarbons assets.

There is potential for the non-oil sector to grow rapidly, albeit from a low base, supported by government infrastructure investment programmes, particularly in the construction, utilities, communications, transport and financial sectors. There is strong foreign interest in Libyan investment opportunities, and although reform tends to be slow and unpredictable, the government appears committed to encouraging private-sector participation. Moves to raise the proportion of locals in the workforce could stimulate greater private consumption, and strong growth in bank lending to the private sector could help to kick-start private-sector economic activity. However, these factors are not yet having a major impact on overall economic growth. Foreign interest in Libya may be dampened by concerns over political unrest spilling over from Tunisia and Egypt.

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We estimate that inflation averaged 2.5% in 2010. Libya's consumer price index rose by 2.9% in the year to November 2010. Inflation is forecast to rise to an average of 4% in 2011 in line with sharp increases in international food and non-oil commodity prices. Libyan inflation is mainly driven by imported products. Stabilisation in international prices will lead to a slowdown in the rate of inflation after 2011, which we forecast will average 3% in 2012-15. Inflation will be sustained, however, by a revival in consumer confidence and higher oil revenue leading to greater domestic liquidity. Price increases will also be caused by Libya's more open trading regime permitting the entry of higher-priced overseas goods, especially clothes, but also furniture and consumer goods. Government subsidies will be maintained, which will ensure that prices for many staple goods, particularly housing and healthcare, are kept in check.

The Libyan dinar is pegged to the SDR and is tightly managed. The huge stocks of foreign-exchange reserves mean that the authorities will be able to defend the currency should any pressure arise. We expect the peg to the SDR to remain over the forecast period. In 2011-15 the SDR is forecast to depreciate against the US dollar mainly owing to a depreciation of the euro, which is a component of the SDR, as a result of concerns about sovereign debt defaults and a possible break-up of the euro area. The dinar will therefore fall from an average of LD1.27:US$1 in 2010 to LD1.3:US$1 in 2015.

The current account is dominated by hydrocarbons exports. Earnings from goods exports are expected to average US$50.3bn a year in 2011-15, up from US$46.3bn in 2010. Trends in exports will follow oil price movements; we expect dated Brent Blend to peak at an average of US$90/b in 2011 before dropping to US$76/b in 2015. The drop in oil prices towards the end of the forecast period will be offset by small increases in production. Goods imports will continue their trend of steady growth over the forecast period, rising from US$24.6bn in 2010 to US$32.7bn in 2015. Rising imports will be a result of growing inputs into government development projects and expanding consumer demand. Consequently, we forecast that the trade surplus will average US$21bn in 2011-15.

The most important element of the services account is oil-sector payments abroad, which are expected to almost stagnate in line with the slow development of the sector. We therefore expect the services deficit to remain steady at an average of US$4.8bn in 2011-15. The income surplus is forecast to increase owing to growth in dividends from Libya's rapidly expanding investments abroad and low growth in profit repatriation by foreign oil companies. Owing to the dominance of oil exports, the current-account surplus will rise and fall with oil prices and is expected to average US$15.9bn (17.5% of GDP) in 2011-15.

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Political events in Tunisia and in Egypt have sent reverberations around the Arab world. Libya has not proved immune to the contagion. In response to the ousting of the Tunisian president, Zine el-Abidine Ben Ali, the Libyan leader, Muammar Qadhafi, addressed Libyans in a speech broadcast on state radio and television. He said that he was "very pained by what is happening in Tunisia" and told the Tunisian people that they had allowed their country to become "prey to hooded gangs, to thefts and fire". He went on to say that Mr Ben Ali's ousting was "a great loss" and that "there is none better than Zine to govern Tunisia", adding that he still considered Mr Ben Ali to be the "legal president of Tunisia under the constitution" and hoped he would remain president "for life".

Colonel Qadhafi's strong condemnation of the uprising in Tunisia stands in stark contrast to the comments of other Arab leaders, who have avoided inflammatory remarks, instead mostly expressing their respect for the will of the Tunisian people. Although it is not unusual for Colonel Qadhafi to be outspoken, his speech clearly contained a coded message to Libyans that any such activity in Libya would not be tolerated.

But in spite of his public remarks, it was clear that he would not support Mr Ben Ali's return to Tunisia. Speaking to Asharq al-Awsat, a Saudi Arabian newspaper, an unnamed Libyan official said that the Libyan government considered the Ben Ali regime "a closed chapter". Indeed, media reports said that the Libyan authorities had played a part in facilitating Mr Ben Ali's escape from Tunisia. The official also vehemently denied reports that Libya was supplying the remnants of the Tunisian regime with arms.

Keen to prevent any spillover from Tunisia, Colonel Qadhafi quickly formed a crisis management team, run by the head of foreign intelligence, Abu Zeid Omar Durda, to monitor events in Tunisia and formulate a domestic strategy. Understanding that Libyans harbour similar grievances to Tunisians, the government immediately abolished all taxes and custom duties on wheat, rice, vegetable oil and sugar, as well as children's milk products. Libya already spends over US$6bn on subsidies and this politically motivated measure will push that bill even higher.

However, the government failed to forestall protests erupting over housing in the middle of January. Clearly inspired by events in Tunisia, hundreds of protesters broke into 1,400 houses under construction in Bani Walid and Benghazi, occupying them for almost a week. The protests turned violent, with gangs of looters ransacking the offices of the South Korean construction contractors, during which several South Korean employees were injured. The protests also spread to other towns, such as Bida'a, Dernah and Sebha.

The protesters were expressing their irritation over the government's failure to provide adequate housing. The government has promised to build some 250,000 housing units by 2014, but many projects are facing severe delays and many Libyans have waited years to move into housing, even after paying deposits.

Wary of events in Tunisia, the Libyan authorities ordered police to avoid clashes with the protesters and gave specific instructions not to fire any live ammunition. The General People's Committee (the cabinet) issued a statement saying that "all the problems will be solved soon through the legitimate authorities". The government also instructed clerics to use their sermons to call for calm. The state-sponsored National Committee of Young Journalists also launched a campaign on Facebook, a social networking website, under the banner "no to theft and looting", which condemned the housing occupations. Calm was eventually restored and some 214 people were reported to have been arrested. In response, the government announced the establishment of a US$24bn investment fund to support additional housing development.

The regional turmoil and domestic ructions it has caused have clearly rattled Colonel Qadhafi. He cancelled his attendance at the annual African Union summit, an occasion that he traditionally revels in. As the focus of the regional disturbances has shifted to Egypt, Colonel Qadhafi has been conspicuous by his silence. He may be busy ensuring that his state security forces are fully prepared for any violence, but events in the region will also have forced him to think again about the likelihood of one of his sons succeeding him. Demonstrations in Tunisia and Egypt have shown that citizens are adamantly opposed to any dynastic succession, a sentiment that is shared by many Libyans.

However, there are signs that Saif al-Islam, Colonel Qadhafi's reformist son, may be well placed to take over from his father. Cables from the US embassy in Libya, revealed by WikiLeaks, a whistle-blowing website, showed that Saif al-Islam's efforts to distance himself from Colonel Qadhafi's regime and promote himself as a liberal reformer have met with some success. One cable from February 2010 said that "young Libyan contacts have repeated over the last few weeks that Saif al-Islam is the "hope" of "Libya al-Ghad" (Libya of tomorrow) and that "amidst the Qadhafi family antics, Saif al-Islam has wisely distanced himself from the local drama". The cable adds that "Saif seems to be making progress in casting himself as a humanitarian, philanthropist, and reformer ... and domestic audiences-particularly among Libya's swelling ranks of young adults-may welcome him as Libya's knight in shining armour".

In recent weeks Saif al-Islam's charitable organisation and media outlets have came under pressure from regime hardliners (January 2011, The political scene), suggesting that his attempts to gain authority over the old guard have failed and that he has lost considerable political ground as a result. However, the wider regional tensions now give his reformist efforts renewed impetus, as hardliners will be wary of enflaming public opinion.

The US embassy cables released by WikiLeaks also undermined the position of the US ambassador to Libya, Gene Cretz, who wrote most of them. One of the cables from September 2009 provided detailed personal information about Colonel Qadhafi, claiming that he "relies heavily" on a Ukrainian nurse, "described as a 'voluptuous blonde'". It added that he "appears to have an intense dislike or fear of staying on upper floors, reportedly prefers not to fly over water, and seems to enjoy horse racing and flamenco dancing". A separate cable said: "Muammar al-Qadhafi has been described as both mercurial and eccentric, and our recent first-hand experiences with him and his office demonstrated the truth of both characterizations". More critically, in response to the Libyan government's actions in the affair involving the alleged Lockerbie bomber, Abdelbaset al-Megrahi, Mr Cretz said that "the regime remains essentially thuggish in its approach".

Following the release of the cables, the Libyan government complained to the US administration and, in January, Mr Cretz was recalled to Washington. Given the regional tensions, it is unlikely that Libya will make too many more demands of Washington. Events in Tunisia and Egypt have shown that the survival of the incumbent regime is heavily reliant on US government support, and Colonel Qadhafi will understand that he needs to keep relations warm right now. That said, were he to come under political pressure, it is highly likely that the US would distance itself from him very quickly.

In early January Libya informed the South Korean government that it would pardon two Korean pastors accused of violating Libya's religious laws and allow them to leave the country. The pastors were first arrested in mid-2010, reportedly for carrying out missionary work, but their arrest was widely viewed as related to an earlier espionage dispute, which resulted in the expulsion of a Korean diplomat (August 2010, The political scene). The two men were released from detention in October but were refused an exit visa and were arraigned for trial.

Libya moved further to mollify South Korea after South Korean contractors were injured during the housing riots. The contractors reportedly suffered damage of up to US$40m, when rioters stole heavy plant equipment and office equipment and set fire to some of the facilities. The Libyan government stated publicly that it would compensate them in full. Contractors from other countries, including China and Turkey, were also affected.

In a further boost for South Korea, at the end of January, Daewoo Engineering & Construction was awarded a US$204m contract to build a 200-bed hospital in Tripoli, the capital, to be completed by October 2013.

Separately, in mid-January, a court in Berlin jailed two Libyans accused of spying on members of the Libyan opposition in Germany since August 2007. The two men were arrested in May 2010. Based on Libya's behaviour during previous diplomatic disputes with Switzerland and South Korea, it is likely to take punitive action against German companies operating in the country.

Invest AD, an Abu Dhabi financial services company, has announced plans to establish a fund that will invest in Libya's stockmarket, participate in initial public offerings (IPOs) and take pre-IPO stakes in Libyan companies. Libya's stockmarket was opened in 2007 and currently hosts 25 listed companies, with up to ten IPOs planned in the next year. Invest AD has a reputation for taking strong positions in frontier markets, most notably in Iraq and parts of Africa. It did not disclose the size of its fund.

Libya's Privatisation and Investment Board (LPIB) announced in mid-January that the long-expected IPOs of Libya's two telecommunications companies, Libyana and Al Madar, would take place before the end of April. The LPIB said that the amount floated would only be between 3% and 5%, well below the previously reported figure of up to 30%. Gamal al-Lamushy, the head of the LPIB, described the capacity of the stockmarket as "very limited" and said that it would "not be a good idea to float such a big amount of capital". Mr Lamushy expected strong interest from Gulf-based investors, as exemplified by the establishment of Invest AD's Libyan fund.

Following through with plans to develop a viable renewable energy industry, the Libyan government announced in late January that a proposal to build a wind farm near Dernah would go ahead. The 61.75-mw scheme will be built by Amtors, a Spanish firm, and will take just short of two years to complete, at a cost of LD180m (US$143m). The farm is the first phase of a 120-mw project planned at Dernah. The Renewable Energy Authority of Libya (REAOL) expects that by 2015 wind farms will provide 500 mw of power. This will double by 2020, as part of a broader policy to generate 10% of Libya's electricity from renewable energy sources by 2020. Currently, less than 1% of Libya's total power output comes from renewable sources.

As part of the wider energy diversification scheme, Libya also plans to build three solar photovoltaic plants, each capable of producing 15 mw of power.

A family-owned investment group from Abu Dhabi, Al Maskari, announced in late December that it was investing up to US$3bn in Libya to help the country establish itself as a renewable energy hub in North Africa.

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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Libya's net foreign assets continue to grow as the state accrues ever more oil revenue. Data from the Central Bank of Libya show that net foreign assets rose by 5.8% in the ten months to the end of October 2010, having grown by 3.3% in 2009. The slowdown in the growth of assets in 2009 was striking, given the rate of growth over the previous four years, which averaged 39.2%. However, in registering higher growth in 2010, the data show that Libya's investment activity is picking up once more in the wake of the global economic downturn. At LD135.5m (US$107.2m), Libya's net foreign assets are equal to 170% of GDP.

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Please see graphic below

Please see graphic below

Please see graphic below

Land area

1,759,540 sq km

Population

6.16m (2007 mid-year estimate, IMF)

Main towns

Population in '000 (2003 estimates, National Authority for Information and Documentation)

Tripoli (capital): 1,149

Benghazi: 636

Misurata: 360

Al Mirqab: 328

Al Bitnan: 142

Sebha: 126

Climate

Hot and dry with mild winters

Weather in Tripoli

Hottest month, August, 22-30°C (average daily minimum and maximum); coldest month, January, 8-16°C; driest month, July, 1 mm average rainfall; wettest month, December, 94 mm average rainfall

Language

Arabic

Measures

Metric

Currency

Libyan dinar (LD) = 1,000 dirham. Average official exchange rate in 2009: LD1.21:US$1

Time

2 hours ahead of GMT

Public holidays

Commercial offices and government establishments are closed on Fridays. Other than the usual Islamic celebrations, national holidays include Declaration of the People's Power Day (March 3rd); Evacuation Day (June 11th); Revolution Day (July 23rd); and National Day (September 1st)

Official name

The Great Socialist People's Libyan Arab Jamahiriya

Form of state

Since 1977 Libya has been a jamahiriya (republic of the people) in accordance with the Third Universal Theory propounded by Muammar Qadhafi in his Green Book, which is a blend of socialist and Islamic theories inspired by tribal traditions. The jamahiriya system defines the political and social order, which is also governed by the Holy Quran. The General People's Congress is the highest legislative body. In 1992 Colonel Qadhafi changed the political structure by dividing Libya into 1,500 mahallat (communes), each with its own budget and legislative and executive powers, formerly vested in the Basic People's Congresses. The mahallat and the congresses are supervised by Revolutionary Committees directed by secretaries, who are chosen personally by Colonel Qadhafi

Head of state

Colonel Qadhafi was appointed supreme leader by the General People's Congress in March 1990 after taking power in a coup in 1969. Saif al-Islam Qadhafi was put forward as general co-ordinator of the Popular Social Command in October 2009 with power over the legislature

Executive

In 2000 Colonel Qadhafi abolished most central government executive functions, devolving responsibilities to the 26 municipal councils that make up the General People's Congress. Centralised control is maintained over the economy, finance, defence and security, energy, infrastructure, foreign affairs, social security and trade portfolios, the heads of which all report directly to the prime minister's office

Legislature

The General People's Congress, delegates to which are chosen by the Basic People's Congresses

Secretary of General People's Committee (prime minister): Baghdadi al-Mahmudi

Key ministers

Agriculture & fisheries: Abu Bakr al-Mabruk al-Mansouri

Communications: Mohammed Ali Zeidan

Economy, industry & trade: Mohammed Ali al-Huwaij

Education & scientific research: Abdel-Kabir al-Fakhri

Energy: Ali Shamikh Mohammed

Finance & planning: Abdel-Hafez Zleitni

Foreign affairs & international co-operation: Mousa Kousa

Health & environment: Mohammed Mahmoud al-Hijazi

Industry & mines: Ali Yusuf Zikri

Justice: Mustafa Mohammed Abdel-Jalil

National security: Abdel-Fattah al-Ubaidi

Social affairs: Ibrahim al-Zarruq

Utilities: Matouq Mohammed Matouq

Secretariat of the General People's Congress

Foreign affairs: Suleiman Sasi al-Shahumi

Popular Committees: Huda Fathi bin Amir

Popular Congresses: Ibrahim Abderrahman Abjad

Secretary (speaker): Mohammed Abdul Quasim al-Zwai

National Oil Corporation chairman

Shokri Ghanem

Central Bank governor

Farhat Omar Bengdara