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The road map reads Libya as a Category 3 state sitting on a Category 1 balance sheet. Reserves of USD 79–83 bn cover more than twenty months of imports, external debt is negligible, the current account is balanced and oil output reached a thirteen-year high of 1.43 million barrels a day in April 2026. Governance, however, sits in the bottom three percentiles globally: two rival governments run two budgets financed by a single central bank, producing a purely domestic central-bank overdraft of 106–115% of GDP, a wage bill of 28% of GDP and fuel subsidies of 20–24% of GDP.
The paper argues that the oil windfall is the risk rather than the cure. The fiscal deficit moved from 25% of GDP in 2024 to a projected 3.5% in 2026 with no change in the state, only in the oil price, and earlier windfalls were divided rather than used to reform. Youth unemployment of 49.5% alongside a dominant public payroll shows a social contract built on rent distribution.
One precondition governs everything else: a single government with an authorised budget. Given that, the authors see Libya's route to Category 2 as the shortest in the series, because the money already exists, running from a unified Treasury account and payroll in year one to 2 million barrels a day and double-digit governance percentiles by years three to five.
Key findings
- The first fiscal acts proposed are a single Treasury account, a biometric payroll registry covering both sides' security forces, and a published, audited allocation rule for National Oil Corporation revenue.
- Fuel subsidies would fall from 20–24% to under 5% of GDP through cost pricing offset by a universal cash dividend from oil revenue, which the paper sees as the only politically survivable way to end smuggling.
- The wage bill would be capped at 15% of GDP within five years, with a fiscal rule based on a conservative reference oil price and a sovereign fund to save windfalls.
- Central-bank financing outside the unified budget would be prohibited by law, the dinar moved to a managed float with published rules, and withdrawal caps lifted on a schedule.
- The Libyan Investment Authority (about USD 68 bn) would be unfrozen under governance acceptable to the UN sanctions committee and used for reconstruction.
Summary of the paper; the full analysis is in the PDF.