An internationally mediated ‘economic track’, formally integrated into Libya’s peace negotiations, should focus on five areas: stabilization of governance, structural reform, capacity-building, anti-corruption enforcement and public diplomacy.
Given nearly a decade and a half of failed peacebuilding, Libyans can be forgiven for mistrusting the intentions of their own elites and foreign states alike. While this paper has focused on Libya’s systemic failings, the influence of foreign states has become increasingly malign in recent years. Moreover, the foreign policy of the US, which until recently has led calls for political solutions and improved economic governance, has shifted to a more transactional approach. The status of the UN, and of multilateral institutions more widely, is in decline.
These shifts make developing an economic track of negotiations harder than ever. Yet the need has not diminished. As the violent reorganization of Tripoli’s security sector in May 2025 showed, the informal settlements that currently underpin the Libyan state’s governance are precarious (see Chapter 1). The institutions critical to the state’s survival – such as the CBL and the NOC – are increasingly undermined and sidelined by vested interests.
Should these trends continue unabated, then the economy will become ever weaker and the opportunities for Libya and its foreign partners to benefit from soundly managed economic development will dwindle. Private foreign investment in Libya will be a riskier proposition, while illicit financial flows and irregular migration will continue to thrive. It is therefore important to make the case that addressing economic drivers of conflict would provide the proverbial tide that lifts all boats for Libyans and their international partners.
The calculus of the UN and foreign states should rest on improving the well-being of the Libyan population, while drawing upon enlightened pragmatism in delivering settlements that have a realistic chance of working on the ground. On the other hand, if external states adopt a narrower, more mercantilist approach – which is the apparent direction of travel – any investments by international companies are likely to be subject to instability and renegotiation as Libya’s economic landscape shifts and society suffers.
With this backdrop in mind, this paper’s assessment of the nature of Libya’s economic drivers of conflict, the paper’s appraisal of efforts to date to mitigate their effects, and its presentation of the lessons from other contexts reveal that negotiations on stabilizing Libya require an enhanced economic track. While there is no substitute for a political track of negotiations to address political succession, or for a security track to agree arrangements in the security sector, the centrality of Libya’s economic challenges cannot be minimized. This problem set clearly illustrates the need for the economic track to be formally established as a forum for international mediation and negotiation – not simply dialogue – on par with its political counterpart.
A revamped economic track of this type should have five components. The first should consist of engagement with current Libyan leaders on stabilizing economic governance in the short term. The second element should be forward-looking, with a focus on planning for and initiating structural reforms to be undertaken under a future government. The third should be continuing to develop the technical capacity of Libya’s public officials and their institutions. The fourth should consist of enforcement measures against corruption and kleptocracy. Last but not least should be engagement of the general Libyan population through concerted public diplomacy. Only through such a combination of efforts can success be achieved.
Components of an enhanced economic track
1. Stabilization of economic governance
In recent years, political incumbents and armed groups have significantly increased their control over state institutions, eroding the independence and operational integrity of these bodies. The aforementioned killing of Abdelghani al-Kikli in Tripoli in May 2025 came against a backdrop of his growing efforts to control the distribution of cash from the CBL and to dominate other key state institutions. These behaviours were emblematic of a trend that has seen a rise in grand corruption and a deterioration in the availability and quality of public services such as education, healthcare and public security.
Unless such issues are addressed, the prospects for success in the wider political process are dim, and the recommendations of UNSMIL and its Advisory Committee are unlikely to succeed. Thus, economic stabilization must come before political transition in the sequencing of steps, rather than the other way around (as has often been the case to date). Consequently, the UN (with its partners) should pursue measures that will stabilize economic governance as part of its ongoing political engagement in Libya. The aim should be to prepare the ground for a future political transition and to arrest worrying trends in economic governance.
Efforts should be limited, however, to ensuring adherence to existing laws and regulations, ensuring transparent financial reporting of laws and regulations, and agreeing a nationally unified budget. In this context, ‘unified’ means a budget that applies across the entire country, as opposed to the GNU releasing a budget in parallel to the GNS. The NOC should be provided with a clearly delineated allocation from the budget to cover its running costs and investment needs, while the revenues it generates from oil and gas should all pass through the CBL; off-book spending and financing from eastern authorities for unvetted projects via the banking sector must cease, as must currency printing by eastern-based authorities. The unified budget should be supported by provisions to ensure transparency and accountability, and should be designed in such a way as to prevent undue inflationary pressures.
The US is currently best placed to lead on this effort. Revamping its ‘economic dialogue’ as an economic mediation process would be the best means of doing this. Engagement by the US special adviser for Africa, Massad Boulos, has recently led to an agreement between western and eastern authorities on a budget for development. If focused on institutionalizing arrangements – rather than representing insider deals with elites – these efforts could be stepped up and formalized, becoming complementary to wider UNSMIL efforts, which focus on medium- and longer-term economic reforms.
Creative means can also be sought to secure Libyan buy-in, such as leveraging of the partial unfreezing of the billions of dollars in Libyan assets held under sanctions regimes. But the key is that any deals must bring with them transparency and accountability to reinstitute checks and balances in the governance of the state’s finances, thereby facilitating a shift towards strengthening of state institutions. Other countries or actors could also theoretically take on the role of the US in such a direct negotiation, but to date there have been no indications that any are willing to do so. The EWG has proven that it cannot fulfil this role.
While these goals may sound modest, they have eluded policymakers for a number of years. In particular, placing pressure on Libyan institutions to act within the law, and naming and shaming them where they do not, would be a significant step forward. Such efforts can build on the quiet work of the US to strengthen the CBL’s anti-money-laundering policies and to establish third-party monitoring of the CBL’s dollar transactions. These efforts can build leverage on Libyan leaders given Libya’s reliance on access to US dollar markets. Improvements in this regard also open up means of pressuring Libya’s commercial partners to encourage better behaviour by Libyan officials and rival powerbrokers through commercial compliance regulations in Western markets.
Where opportunities exist to find technical fixes that would improve economic governance, these should be explored. The World Bank, in particular, could provide useful insights, given its expertise in public finance management. Among other measures, external engagement with Libyan policymakers to assist in the transparent and accountable execution of spending under Chapter III (development) of Libya’s budget framework could help to ensure that, even amid ongoing policy dysfunction, the state is investing in its own future. Presently, planned expenditures on development are rarely executed in practice, as procedural problems resulting from the national governance split impede the legal disbursement of funds. One symptom of this split is the Haftar family’s apparent reliance on a dedicated Libyan Development and Reconstruction Fund for public works in eastern Libya; however, spending through this fund has little or no official oversight from the Libyan authorities, and the fund appears to be accountable (and in name only) to the House of Representatives. Reorganizing funding mechanisms and channelling funds through the proper state entities must be a priority for both Libyan and international policymakers.
2. Medium- and long-term economic reform
Few oppose the view that Libya needs structural reforms to its system of economic governance. There are a series of potential reform goals that would be likely to generate widespread public support. These include: the devolution of state powers to local government structures; development of the private sector; economic diversification; adaptation to the global energy transition; and climate action. However, discussion of specific reforms requires moving from considerations of the vested interests of political elites to an approach that places the rights of Libyan citizens at the heart of governance. In practice – and drawing on lessons from Lebanon and Iraq – this means the abandonment of power-sharing as the operating principle of economic decision-making.
Achieving this will depend on a systematic programme of government action, the passage of new legislation and the mobilization of funding mechanisms beyond year-to-year budgetary allocations. The question is how this can be achieved under Libya’s current circumstances. A range of policies could be pursued to these ends, though each brings different challenges. The simplest option would be to leave major decisions to a future, unified Libyan government. An alternative approach might be to address foundational elements of economic governance in a constitutional process. Yet both of these options would risk delaying action, potentially indefinitely. Libyans are mindful of the experience of the current GNU, which entered office in March 2021 with a mandate to deliver elections six months later. At the time of writing, in November 2025, the GNU remains in place, no national-level elections have been held, and no significant economic reforms have been pursued.
A more effective means of initiating economic reforms could be through incremental changes, with each measure tied to the political process. One promising idea that has been floated is the establishment of an economic reform charter which any incoming government would be expected to endorse and commit to implementing. The structured dialogue on the economy currently under development for UNSMIL could be the vehicle to develop this charter. This would provide a clear mandate and purpose for the structured dialogue. Such a charter could earmark priority areas for action, such as administrative decentralization, private sector development, economic diversification, and climate change mitigation and adaptation. Importantly, the charter could identify programmatic actions for the next government to pursue. Experience from reforms in Aceh and South Sudan underlines the importance of ensuring that programmatic elements consist of actions that state institutions have the capacity to deliver. It would be for the incoming government and the wider state apparatus to then formulate an implementation plan and carry the reforms out. International support should be mobilized for such an effort.
An economic reform charter would need to be endorsed by participants in the associated political process, and publicly endorsed by the incoming government prior to its entering office.
Critically, an economic reform charter would need to be endorsed by participants in the associated political process, and publicly endorsed by the incoming government prior to its entering office. This would be necessary to ensure that technical proposals have a means of being implemented by the experts who have developed them. The international community would need to play a role in holding the future government accountable to its commitments. One practical way of doing this would be to deploy technical experts to the new government to facilitate their plans and retain a forum for sharing information on progress, such as through the EWG.
Such an approach would by no means be foolproof. There are many ways in which it could fail, yet an economic charter would at least provide a means of diluting the powers of an incoming government and reducing the winner-takes-all dynamics that have inhibited reform to date. It would also enable complicated economic issues to be addressed in a manageable fashion.
3. Capacity-building
Public finance management experts caution that Libyan officials and institutions lack sufficient capacity to implement a coherent and strategic programme of reforms. The provision of targeted institutional support via the World Bank, the International Monetary Fund and bilateral support packages should centre around the key deficits in economic governance identified in this paper. Addressing these deficits would probably need to be a focus of the economic charter described above.
4. Anti-corruption enforcement
Outside of these distinct efforts, the UN and its partners should continue to support the efforts of the Libyan state’s oversight bodies, most notably the Libyan Audit Bureau and National Anti-Corruption Commission, in promoting good governance and combating corruption. In September 2025 these two agencies announced the launch of a joint strategy to combat key vectors of corruption. As corruption associated with elite capture of the Libyan state is often international in nature, partnerships between Libyan oversight bodies and investigators in other countries could strengthen anti-corruption efforts. Internationally supported enforcement could also constrain the behaviour of Libyan elites, many of whose members have developed a sense of impunity over their economic activities. Violations of Libyan and international laws could be addressed via criminal justice mechanisms within Libya but also in other jurisdictions given the international nature of some of the activities.
Within Libya, the establishment of clear ‘rules of the game’ through the economic track would provide a mechanism for stronger anti-corruption measures. Sanctions issued by external states should be on the table as a possible punishment for individuals who are profiteering from Libya’s governance chaos. The UN Security Council’s sanctioning of an armed group commander, Ibrahim Jadhran, in 2018 for economic damage to the Libyan state is a helpful precedent in this regard.
5. Public diplomacy
Finally, for these efforts to be successful, the UN and its partners must engage the Libyan public. Ordinary Libyans have long been excluded from discussions over the future of the country. Successful engagement on the economic track, and on the political track for that matter, must mobilize public support by explaining the goals of the initiative and building momentum through expansive public diplomacy. The UN and its international partners can help with this process, capitalizing on previous efforts such as the ESCWA-led socio-economic dialogue and the ongoing attempts of the Libyan Peace Makers group.
Last word: No option but to continue trying
There are many reasons why the suggestions in this paper for the development of an economic track, in conjunction with a wider political process, may fail. As noted, support from external states for a negotiated settlement to Libya’s ongoing conflict has waned considerably in recent years, with a number of countries focusing on building their political capital with existing office-holders to serve geopolitical and/or economic agendas. The UN’s credibility has also suffered following repeated failures of its mediation attempts. However, this does not diminish the necessity of reaching a settlement.
Libya’s current trajectory is one of elite consolidation over the control of state resources, and of escalating misuse of state funds. This is depleting the remaining capacities of state institutions, and perpetuating a level of public spending that cannot be sustained. Any outbreak of substantial conflict, or a significant fall in global oil prices, threatens to worsen the economic situation. Moreover, the problems of rent-seeking and economic predation associated with Libya’s current governance arrangements have left the country unequipped to tackle the challenges of the future in relation to the renewable energy transition, climate change and sustainable development. Foreign states that are building their relationships and influence within this system can only be assured of short-term returns. A more robust state would offer a much-improved partner for Libyan’s foreign interlocutors.
