Coordination aims to lift Libya’s non-oil tradables base

Libya’s new cooperation framework between the Industry Ministry and the Export Development Authority signals a pivot from ad-hoc crisis management to a rules-based attempt at competitiveness. The policy arrives with macro buffers in place: gross international reserves stood at about $98.8bn at end-September 2025, while the official exchange rate was reset on 6 April 2025 to 5.5677 LYD/USD. Crude output has stabilised near 1.38m b/d in October 2025, with authorities targeting 1.6m b/d by end-2026.

Headline inflation remains low by regional standards, with end-2025 consumer prices projected around 1.8–2.3 percent. Against this backdrop, the non-oil tradables base is small—non-hydrocarbon exports totalled roughly $1.2bn in 2024—leaving growth and fiscal outcomes highly correlated with Brent (BZ=F).

The mechanism of the framework addresses the non-tariff frictions that suppress firm scale. Consolidating standards, testing, and export certification under a single administrative channel should compress approval times from multi-quarter cycles to a sub-60-day target, shrinking working-capital lockups and enabling banks to discount receivables against clearer collateral. In a system where liquidity is often routed through public flows, faster permit and customs cycles lower the cash-conversion cycle, lift capacity utilisation, and strengthen the economics of trade finance. If documentary certainty improves, lenders can extend short-tenor export lines with lower loss-given-default assumptions, multiplying real-economy turnover without proportionate balance-sheet risk.

The exchange-rate regime remains the key transmission channel. The April 2025 reset reduced mispricing but did not fully close the parallel gap; with black-market quotes near 7.2 LYD/USD at the time of the move, the implied spread approached 29 percent. The policy test for 2026 is whether administrative streamlining and steadier FX supply can narrow that gap to below 10 percent for at least two consecutive quarters. A tighter spread would reduce import-price dispersion, improve budgeting visibility for SMEs, and lower the risk premium embedded in supplier credit. With oil receipts steady and reserves elevated, authorities can phase import liberalisation for capital goods while protecting external balance, provided procurement is sequenced and netted against hydrocarbon inflows.

Fiscal arithmetic both enables and constrains execution. Fuel-subsidy outlays were recorded at roughly LYD 12.8bn between January and November 2024, while total public spending expanded amid dual-authority fragmentation. Without a unified budget and a timetable for subsidy rationalisation, logistics and power bottlenecks will continue to dilute private capex returns. Prioritising electricity reliability in industrial zones and accelerating port throughput at Misrata and Benghazi would raise the effective capital productivity of every dinar invested in machinery, improving internal rates of return that foreign partners assess. The immediate objective is not import substitution at any cost, but predictable delivery into North African and Mediterranean value chains where Libya already imports intermediates at scale.

Market relevance sits in credibility, not headlines. Frontier allocators will benchmark Libya’s administrative reforms against peer playbooks—Egypt’s standards and customs reforms after 2016, Tunisia’s SME export scaffolding—while pricing the political-execution discount unique to Libya. With reserves high and oil volumes stable, the macro cushion exists; the market reaction will track operational markers rather than narrative. Equity and credit risk proxies such as the frontier ETF (FM) and regional bank research will look for evidence that trade documentation times and port dwell times are structurally falling, not just episodically improving.

A measurable outlook anchors the policy pathway. By Q4-2026, non-oil goods exports should register a compound growth rate of at least 12 percent from the 2024 base; manufacturing value added should edge toward 5–6 percent of GDP by 2027; the official–parallel FX spread should average below 10 percent for two consecutive quarters; median export-permit processing should fall to under 60 days; and median customs dwell at main ports should be below five days.

Oil production should hold at or above a 1.40m b/d rolling quarterly average while end-period CPI remains inside a 1.8–2.5 percent band. If these thresholds are met on time, the cooperation framework will have translated administrative reform into a durable improvement in tradables capacity, FX predictability, and private-sector credit transmission, with Brent correlation declining at the margin and the growth mix shifting away from exclusive hydrocarbon dependence.