4. The war economy is highly damaging for the future of the Libyan state.
First, it provides an enabling environment for networks of armed groups, criminal networks, corrupt businessmen and political elites to sustain their activities through illicit sales and predatory practices. Their operations are closely linked to the spread of violence and are a spur for further conflict.
Second, it perpetuates negative incentives for those who profit from the state’s dysfunction. Only effective governance, supported by a durable political settlement, can tackle the foundations of Libya’s war economy.
Finally, the political contestation and resource predation practised by those engaged in the war economy are having a disastrous impact on Libya’s formal economy by undermining what remains of its institutions. As the war economy persists, the prospects for the restoration of functioning central governance in Libya becomes more distant, threatening to create a vicious cycle that accelerates further state collapse.