What does Libya’s first ‘unified’ budget in 13 years mean?

Libya will have a “unified” budget for the first time in 13 years, but it still has two governments. The new unified budget — announced on 11 April — could mark a significant shift from the chaos that has marred the country’s finances since the central government was split in two in 2014: There are governments today in the East (in Benghazi) and the west (Tripoli, the nominal capital).

What’s changed: Libya has a budget that provides a degree of revenue sharing for the rival governments.

While this is very welcome news for Libya, its promise also comes with plenty of caveats and what-ifs, as we previously reported in our deep dive on the country’s massive reconstruction potential. We spoke with Jalel Harchaoui, a Libya analyst at the Royal United Services Institute, to get a deeper understanding of what the unified budget means, why now, and what’s next.

EnterpriseAM: What does this unified budget mean? What changes and what remains the same?

Jalel Harchaoui: The most significant shift is the introduction of a hard ceiling on expenditure levels. It also forces a level of transparency that simply didn’t exist before. For the first time, the expenditures of the Benghazi government (in the east) are being explicitly put in writing. Previously, the lack of oversight meant that spending data only surfaced months after the fact.

By putting the eastern and western administrations on a level playing field, the new framework provides visibility into competing interests. You can see the amount of construction money spent by the Haftar family (in the east) and how much is spent by the Dbeibeh family (in the west). This visibility extends to the public payroll, where salary levels for public servants are finally documented in a way that allows for basic oversight. And when you look at the salaries, they are very reasonable. Some may even say they’re too low to sustain.

Now, the primary concern is that this budget is a document, not a law. In a standard legislative environment, a budget is voted on by a parliament. Here, it was merely signed by individual members from the Parliament and the High Council of State. Without a firm legislative basis, the accounting conventions and the legal authority of the central bank to execute the document remain unclear.

And there are also significant gaps in oversight. It remains to be seen if the Central Bank can report on disbursements in real-time or if it even has full visibility into all spending. Furthermore, the budget for the National Oil Corporation remains separate from the state budget, leaving a major piece of the economic puzzle outstanding. While the US has pledged to return in August to monitor progress, ignoring certain parts of the underlying conflict could make this progress dangerous if not handled with care.

EnterpriseAM: Who’s driving this process, and why now?

JH: The impetus for this unified document has come almost unilaterally from the Trump administration, which stands in contrast with the Biden administration’s laziness on Libya and other identical issues. The US role was positive and is moving things in the right direction. Historically, these kinds of efforts were handled by the IMF, the World Bank, and the UN.

An impulse for business is driving the US push in Libya, often led by figures like Massad Boulos (Trump’s senior advisor on Arab and Middle Eastern affairs). So when he moved on Libya — primarily for business reasons — he ended up mobilizing professionals within the departments of treasury, energy, and state, all of whom are people with technical expertise, to do what they do best.

While this approach isn’t perfect and could even be dangerous by ignoring certain parts of the conflict, it is a relatively refreshing change in momentum.

EnterpriseAM: So, where do we go from here?

JH:The next major milestone is August, when the Americans have pledged to return and audit the execution of the document. They are going to be more catholic than the pope and more Libyan than the Libyans themselves. They successfully pushed their military track for Libya in the form of the Flintlock joint exercises in mid-April. And they also unveiled the unified spending framework, which is the unified budget, if you will. That is the economic track.

Now, they intend to push the political track immediately by announcing a big effort to unify the governments themselves. But that is not going well at all. It is likely going to prove much slower and more laborious than they initially planned.