Redacted Intelligence Briefing: Libya’s Economic Outlook at the End of 2025 – Foreign Reserves, Oil Revenues, Smuggling Networks, and Post-Oil Risks

By/ Abdulsalam El-Salhi, Journalist

Tripoli, Libya – December 5, 2025

Dated 4 December 2025, the Central Bank of Libya’s statement covering the period from 1 January to 30 November reveals that the country has moved beyond a typical economic slowdown into a state of systematic depletion that threatens overall macroeconomic stability. Official figures show total public revenues of 115.4 billion LYD (approximately USD 23.7 billion), while expenditures reached 107.5 billion LYD, leaving a nominal surplus of roughly 7.9 billion LYD. Despite oil production exceeding 1.2 million barrels per day, actual oil revenues deposited amounted to only USD 20.7–20.9 billion — far below expectations. Monthly oil receipts plunged to USD 1.4–1.6 billion instead of the anticipated USD 2.4–2.6 billion. Meanwhile, foreign-exchange outflows surpassed oil revenues by more than USD 7.8 billion, resulting in a de facto deficit that is eroding the country’s reserves at alarming rates.

The primary driver of this deterioration is the smuggling of subsidized fuel, now considered the largest instance of organized corruption in Libya’s modern history. An investigation published in late 2025 estimates that Libya lost nearly USD 20 billion between 2022 and 2024, including USD 6.7 billion in 2024 alone. The barter system introduced in 2021 — crude oil exchanged for imported refined fuel — massively inflated fuel imports to illogical levels exceeding 41 million liters per day, of which more than half was smuggled immediately upon entry. Although the barter system was officially suspended in March 2025, losses have continued at nearly the same pace, signaling that the smuggling networks had by then become deeply institutionalized.

Fuel smuggling is controlled via two major geographic structures — in the east and the west — which, despite public political rivalry, operate in parallel and often in a complementary way. In the east, a powerful military-backed authority controls major ports and key land and maritime supply routes. Shipments are routed through large ports, informal loading areas, and land corridors extending into neighboring countries such as Sudan, Chad, and Niger. The eastern maritime routes along the coast remain among the principal gateways, where fuel is loaded onto vessels that disable tracking systems and execute ship-to-ship transfers in international waters. The south functions as a central transit zone, with armed formations managing critical transit routes and storage hubs.

In the west, influential armed groups administer smuggling operations through ports under their control, as well as land routes linking the coastline with mountainous and southern regions. Large volumes of fuel are transported by small boats to neighboring countries or to larger vessels offshore. A significant portion of fuel smuggled from the west is routed southwards, after which it merges with eastern corridors, indicating informal economic coordination across the divided networks.

In southern Libya, these smuggling conduits intersect with various armed groups dispersed along the borders, enabling the flow of fuel towards Sahel and Sahara states in exchange for unofficial fees levied on convoys. The south’s strategic significance lies in its role as a convergence point for both eastern and western networks. Additionally, the southern corridor connects to regional smuggling routes that supply fuel to foreign armed actors, contributing to broader regional destabilization.

These networks deploy sophisticated operational methods: they inflate the number of fictitious fuel stations, exploit digital fuel-card systems, use “dark” vessels where tracking is disabled, and conceal fuel inside seemingly innocuous commercial shipments. The combination of weak oversight and institutional fragmentation has allowed systematic leakage to persist over years, draining state resources while escaping public scrutiny.

Internationally, some of the diverted fuel has found its way to armed groups and conflict zones in neighboring countries. Regional partners who benefit financially from the trade provide indirect support to Libyan actors. Some Mediterranean countries have also emerged as final destinations for fuel shipped across the sea. As such, fuel smuggling in Libya has transcended criminal economic activity — it has become an integral component of a broader geopolitical and military network influencing regional stability.

In the broader context, the outlook for global oil demand adds further urgency. Global oil-market analyses indicate that worldwide demand is likely to reach its peak before 2030 and then enter a downward trajectory. For a country like Libya — where over 95% of the state’s revenues rely on hydrocarbons — the lack of economic diversification renders it highly vulnerable to shifts in global energy markets. This structural fragility is further exacerbated by widespread institutional corruption. At the same time, the national sovereign-wealth fund remains paralyzed, stalled by political division and protracted litigation, rendering it ineffective as a vehicle for economic diversification.

Current projections suggest that if the status quo persists, Libya may confront a full-scale economic collapse between 2026 and 2028. Foreign reserves could shrink below USD 40 billion, while the parallel-market exchange rate could depreciate to 10–15 LYD per US dollar, accompanied by high inflation and severe shortages of fuel, food, and medicine. Such a scenario could trigger widespread social unrest, especially in the south and west, and likely prompt renewed oil shutdowns used as political leverage. The situation underscores the critical need for immediate international intervention — notably through targeted sanctions against networks involved in smuggling and a comprehensive program to restructure state institutions and stabilize the economy.