Libya Edges Closer to Unified Budget Framework After 13-Year Split

Mintesinot Nigussie

Libya has taken a tentative step towards fiscal coordination after rival authorities agreed on a unified framework for public spending, in a rare move that the central bank says could help stabilise the country’s fragile macroeconomic environment.

The Central Bank of Libya said it welcomed the signing of an annex to a wider development agreement that aligns the state’s expenditure schedules across four budget chapters. The arrangement brings together spending plans under a single framework for the first time in more than a decade.

At its core, the deal is an attempt to impose a shared ceiling on public expenditure across Libya’s divided institutions, anchoring spending to what the central bank described as the country’s “actual fiscal capacity”. The bank said this could support financial sustainability and help reduce long-standing distortions in public finances.

Libya’s fiscal system has remained fragmented since political divisions deepened more than 13 years ago, with competing authorities managing parallel budgets and revenue channels. That fragmentation has complicated monetary policy and placed persistent pressure on the exchange rate.

In its statement issued in Tripoli on Saturday, the central bank said tighter coordination on spending could strengthen the Libyan dinar and improve exchange rate stability by easing pressure created by uncoordinated fiscal expansion.

The bank also pointed to what it called constructive international facilitation, including a mediating role played by the United States, which helped bring the agreement to completion.

Businesses and investors in Libya are expected to benefit from greater fiscal predictability and improved macroeconomic stability as the country moves closer to a unified budget framework.

Overall, the agreement represents a significant, albeit tentative, step toward ending more than a decade of fiscal fragmentation in Libya.