Libya central bank urges tough spending cuts

BENGHAZI, Libya, Jan 17 (AFP): Libya's central bank Thursday called for tough measures in order to halt spending that saw the 2014 budget deficit reach a staggering $18.6 billion, as oil revenues dwindle.
"Immediate and urgent steps are needed, no matter how painful they may be, to better manage spending and provide basic everyday needs to the people," the bank said in a statement.
According to the central bank, total revenues for 2014 reached $15.5 billion against $34.1 billion in spending, leaving a deficit of around 55 per cent, or $18.6 billion.
It also warned of the "negative impact" this could have on Libya's foreign reserves, in an indirect admission that it has been dipping into the reserves in order to keep the country afloat.
Libya's once lucrative oil industry has fallen victim to the unrest that has gripped the country since dictator Moamer Kadhafi was toppled and killed in the 2011 NATO-backed uprising.
Since then powerful militias have been battling for control of key cities and the nation's oil wealth, in a situation complicated by the rivalry of two governments and two parliaments.
Oil is Libya's main natural resource, with a pre-revolt output capacity of about 1.6 million barrels per day, accounting for more than 95 per cent of exports and 75 per cent of the budget.
But production fell to about 350,000 barrels per day in December as an alliance of Islamist-led militias launched a bloody offensive to seize control of key terminals in the so-called "oil crescent" in eastern Libya.
The army repelled the assault during which fires broke out of control for days at the oil tanks in the key Al-Sidra terminal.
The central bank said the drop in oil prices on the international markets had also fuelled the financial crisis in Libya.
"Due to the dangers that lie ahead, the central bank will take temporary austerity measures (of its own) to contain foreign reserves until the situation returns to normal," the statement said.