Voice of America (Washington, DC)

2 March 2014

Libya: Buffeted By Chaos, Libya Faces Energy, Budget Crunches

Cairo — Already buffeted by lawlessness and seemingly unending political turmoil Libya is now facing budgetary and energy crunches, say top officials.

Libya's oil production plummeted just over a week ago after armed groups shutdown a major oilfield in the southwest of the country, piling on a further challenge for the country's beleaguered government, which has been unable to engineer an end to a seven-month oil blockade by unruly militias.

The shutdown of the el-Sharara oilfield in the Murzuq desert is adding to government budget woes created by the blockade of key oil-exporting ports by federalist militias who want semi-autonomy for eastern Libya. Libya's energy industry provides more than 90 percent of state revenues and accounts for 70 per cent of the country's GDP.

El-Sharara was only restored to full production in January, a restoration cited by Libya's Prime Minister Ali Zeidan as one of his signature achievements. With revenue worries mounting, the head of the parliamentary budget committee, Mohammed Abdallah, is warning the country faces a budgetary crunch, posing "a very big danger" for Libya.

Libya's oil output has now fallen to 230,000 barrels a day; far short of the 1.4 million bpd it reached before the oil blockades. El-Sharara has a 340,000 bpd capacity.

Libya has the largest oil reserves in Africa. Even so, Zeidan's government, which managed to exploit political factions in January to prevent the interim parliament, the General National Congress, from passing a vote of no confidence in it, has already incurred a deficit of nearly four billion dinars ($3.2-billion) this year alone.

It has presented a six-month budget to the GNC, which would see a jump in public sector wages. Many of the untruly militias are on the government payroll - an attempt by Zeidan to placate them, say analysts.

With government revenue drying up, the government is also faced with a worsening domestic energy crunch-one likely to deepen public disaffection with the country's fitful and violence-plagued transition from autocracy to democracy.

The militias have added to energy-generating shortfalls by damaging and looting several of the country's aged and poorly maintained power plants.

Neglected during the 42-year dictatorship of Col. Gadhafi, Libya's energy infrastructure has labored to cope with consumer and business demand. Rolling blackouts are a regular feature during the high-usage months of the summer. Electricity ministers are generally mocked as ministers for blackouts.

In January Revenue Watch Institute, a New York-based think tank, warned in a study by its economic analyst, Andrew Bauer, that Libya despite its oil resources is heading for bankruptcy. "If current trends continue, the nation of 6.5 million may well go bankrupt by 2018," Bauer maintained.

With problems mounting - from targeted assassinations to deteriorating security - ordinary Libyans are becoming increasingly frustrated. On February 20, Libyans voted to elect a Constituent Assembly tasked to draft a new constitution.

The low-turnout and lack of public enthusiasm contrasted with the elections 18 months ago for the GNC, the first time Libyans had gone to polls in half-a-century. Only about a third of the eligible electorate bothered to register for the Constituent Assembly and only half of those who did register turned out to vote.

"The low turnout figures send a clear message to the political elite in Tripoli that Libyans have lost trust in them-and, by implication, in the democratic process itself," cautioned commentator Mohamed Eljarh in a blog post.

The assembly has been given four-months to draft a constitution but few analysts think this deadline will be met, risking a further erosion in public trust in the democratic process.

In February, the GNC stirred widespread criticism by extending its interim mandate, three years after the overthrow of Moammar Gadhafi, because it had failed to meet the timetable for drafting a constitution.

Dueling political factions linked with militias have threatened to force the GNC to step aside and the last few weeks Libya has been awash with rumors of coups.

Militias from the town of Zintan, the most transition-loyal of major Libyans towns, demanded on February 18 that the GNC disband, prompting the interim parliament's speaker to accuse them of threatening "a coup d'etat."

Other factions and militias, mainly Islamist, have demanded that Zeidan resign. - something he says he will not do - for now.

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