News / Middle East

Libya Bankruptcy Warning Raises Concerns

Buildings destroyed in the Bab al-Aziziya compound and an occupied intact building in Tripoli, Libya Nov. 26, 2013(AP Photo/Manu Brabo)Buildings destroyed in the Bab al-Aziziya compound and an occupied intact building in Tripoli, Libya Nov. 26, 2013(AP Photo/Manu Brabo)
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Buildings destroyed in the Bab al-Aziziya compound and an occupied intact building in Tripoli, Libya Nov. 26, 2013(AP Photo/Manu Brabo)
Buildings destroyed in the Bab al-Aziziya compound and an occupied intact building in Tripoli, Libya Nov. 26, 2013(AP Photo/Manu Brabo)
Libyans like to say their country will one day be seen as “Dubai on the Mediterranean” -- rich, successful and advanced. But as their country struggles with a fitful political transition from autocracy to democracy amid storms of militia violence, political squabbling and lawlessness, they are now hearing for the first time talk that Libya could go bankrupt.
 
That could happen in four years, according to Revenue Watch Institute, a New York-based think tank.
 
In a study by its economic analyst, Andrew Bauer, a former member of Canada’s G7 and G20 delegations, Libya has all the oil resources it needs to become the richest country per capita in North Africa but “if current trends continue, the nation of 6.5 million may well go bankrupt by 2018.”
 
Libyan government officials scrambled to dismiss the forecast but just a few days ago, the deputy governor of the Central Bank of Libya, Ali Salem, warned that Libya’s overdependence on oil “could become a nightmare.” Directly addressing the hopes of Libyans of an Emirate-style future, he cautioned at a seminar in Tripoli that Dubai’s enormous wealth comes not just from oil, but is generated by a diversified economy.
 
Because of economic policies pursued during the 42 years of Col. Moammar Gadhafi’s dictatorship, Libya lacks a diversified economy and has only a fledgling private sector. Half of all of those in the labor force are on the government payroll.
 
Bauer says the biggest immediate problem is a drastic fall in government revenues because of a months-long oil blockade by federalist militias who want semi-autonomy for eastern Libya. “Since the start of a series of blockades at oil fields and ports, revenues from oil, which represent over 90 percent of all government revenues, have plummeted.” Oil exports are now less than 10 percent of what they were before the blockade began last July.
 
As result the government’s budget deficit will exceed $4 billion in 2013 and more this year, if the blockade is not lifted soon, he says. On top of that government spending is rising rapidly with a 20 percent across-the-board salary hike for the country’s 950,000 government workers and large increases in family allowances and food and housing subsidies.
 
In addition, the government has been paying salaries to 200,000 people who registered as veterans of the uprising that toppled Gadhafi, despite the fact that most analysts believe the actual rebel fighting force was made up of no more than 25,000.
 
Much of the increased spending is a bid to buy peace, admits Mohammad Saad, a member of Libya’s General National Congress. “The problem is that people think that as we have money we can do and buy anything – that’s okay for an individual but not for a government,” he says.
 
Saad, like Bauer, worries that there has been little productive and capital spending on the country’s neglected and shoddy road system and infrastructure, on hospitals and schools – all things that help long-term growth and assist in economic diversification. Just 11-percent of government expenditure last year was dedicated to capital expenditure. 
 
Bauer says, “Libya could be in big trouble soon.” And that could happen despite the fact the government is sitting on almost $200 billion – $120 billion in foreign reserves and $65 billion in Libya’s sovereign wealth fund. But at the rate Libya is spending “the country could go bankrupt within four years.”
 
It is all a far cry from the picture in 2012. After contracting by almost 60 percent in 2011, the year of the uprising, the economy grew by 120 percent in 2012, thanks to oil output returning almost to where it was before the rebellion erupted. The International Monetary Fund forecast a 16 percent growth rate for 2013 and the same for every year until 2018.
 
High oil prices allowed Libya’s new rulers to maintain the high spending without worrying, using the public purse to fund the subsidies and allowing it to maintain salaries for revolutionary militiamen and those who claimed veteran status without incurring a deficit.
 
All of the spending has fueled a consumer boom, most noticeable in upscale districts in Tripoli and Benghazi where dilapidated stores have undergone makeovers with bright new facades and contemporary shop fittings.
 
The Tripoli district of Gargaresh has led the way where on late afternoons the area is full of new model Kias and hijab-chic mothers and daughters eyeing the latest Western and Gulf fashions. The shops are stocked with up-to-date electronics, food from Italy and fruit from as far away as Ecuador. Many of the store signs are in English – a snub to the past; Moammar Gadhafi banned signs in English.
 
But the entrepreneur behind much of the retail boom, Hesham Husni Bey, Libya’s richest businessman, has been expressing his worries for months about the direction the country is taking economically.  He complains about over-regulation tying down the private sector. “The government is doing nothing to educate Libyans about the workings and benefits of a free market and to get them to shake off the inherited mentality of expecting the government to provide everything,” he says.
 
The country is not rich enough for that mentality to persist, Bey says. “We are not the Emirates or Qatar.”

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Comments
     
by: thepoetpete from: Chicago
February 01, 2014 12:30 PM
Further proof that wherever the US intervenes therein lies hellish nightmares for the people of that country. It is simple, and need not be constructed by some just to smoke the involvement of the West and its greed.

by: Firozali A.Mullar from: Tanzania
January 26, 2014 5:44 AM
Sure, there are books out there, but if we aren't nurtured to appreciate the importance of history from a young age, why would we read them? We live in a transitional period. Ten or 20 years from now,...


by: Firozali Mullar from: Tanzania
January 25, 2014 12:51 PM
Therein lies the fundamental difference between then and now - that the images of children learning how to properly and safely operate guns is "shocking." We think this without pausing to consider why it's supposedly shocking. It's because we've spent the last 50 years in deep and progressive moral decay where the core values of the children and their parents in these pictures is very, very different from the core values of children and their parents today. Overtly liberalized and "progressive" parents borne out of the Sixties have been variously indoctrinated in the beliefs that capitalism is evil, Republicans are evil, sex has no consequences, killing infants in the womb is proper under the guise of a "right to privacy," ending the lives of the elderly is likewise acceptable because it's difficult to deal with infirm old people, the nebulous category of the rich should be taxed until they are broke (then we should go drain their bank accounts, too, to get our "fair share" as Obama and numerous bumper stickers proclaim), we should actively be creating a government-centric Socio-Communist utopia that its citizens must worship lest they be trapped in the meat grinder of disapproval (for example, being Christian, or against that utopia, or against unfettered acceptance of sodomy as a moral basis for usurping marriage, or failing to believe that the government does not always act in our best interest), or purporting that disincentivizing an entire generation of already shiftless and disaffected young people utterly lacking in what might remotely be called a moral compass (see the UK and Europe in general for this reality writ large). In fact it's a stipulation of our new covenant: That we have no God, no controls, we are amoral automatons shunted about by the random happenstance of the universe, that we are essentially meaningless voids grasping at meaning, finding none. These photographs are deliberately held up by the "journalists" of today as though they were some sort of amazing anthropological find - "Look how retrograde the world was back then! Children learning gun safety in a school! Hideous! Shocking!" We are supposed to nod our heads in all gravitas, pointedly agreeing with the mocking tone informed by our faux civility and tissue paper moral superiority to that deeply ignorant generation who were in fact were our parents and in many cases our grandparents. What should be most shocking is that we lack the fundamental moral fortitude, insight, and even crude self-awareness to see the quiet intelligence and wisdom of a generation that had no qualms about exercising its basic Constitutional rights (you remember those, don't you?) and that would never have imagined that they or their children or their children's children - raised properly and uprightly and according to natural law - would ever have remotely considered that the guns they were learning to operate safely would ever be used by dark, twisted, demonized young men to slaughter people. They saw such darkness for what it naturally was clearly and it never would have occurred to them to confuse the devil inside the hearts and minds of men with the shockingly ignorant point of view of modern liberalism that it is possible to legislate away the darkness hiding in the souls of men.

by: Firozali Mullar from: Tanzania
January 25, 2014 12:43 PM
While private investors showed a voracious appetite for gold in the wake of a sharp drop in prices, professional investors were absent from active buying, a trend expected to persist through this year. But a short-covering rally in the first quarter of this year isn't being ruled out and this could contribute to the recent stabilisation at a little more than $1,185/oz.

Tapering of the bond-buying programme in the US by the Federal Reserve didn't have a major impact on the gold market, as prices fell in the second quarter. The result was while exchange-traded fund (ETF) investors sold 880 tonnes through 2013, bar hoarding in East Asia, the Indian sub-continent and West Asia stood at 1,066 tonnes.

It is expected tapering in the US will continue till the end of this year and by then, some interest rate guidance is expected to emerge. Improving economic fundamentals are expected to continue to improve investor appetite for risk and prevent hefty gold investment.

"With investment activity muted, gold is likely to show a more seasonal pattern than has been the case in recent years. This points to the possibility of a brief test of $1,000, should there be any further investor retreat in the second and possibly the third quarters of the year. But physical demand is expected to be robust enough to defend any test of this level and any such dip will be short-lived," said Rhona O'Connell, head of metals research and forecasting at Thomson Reuters.

Gold to take a back seat to other asset classes this year, but strong physical demand will sustain elevated average price this year. China was the world’s largest jewellery fabricating nation in 2013 with 33% of the world total, while Indian government restrictions choke off local growth; China and India form 51% of world jewellery fabrication. Net of scrap, global jewellery fabrication gained 48% year-on-year in 2013.

by: Firozali Mulla from: Tanzania
January 25, 2014 12:40 PM
FROM INDIA WHERE GOLD IS LIKE GOD This quarter, gold prices could rise five per cent to $1,330/oz, owing to strong physical buying and robust fabrication demand, a Thomson Reuters GFMS study has said.

“It is possible for gold to touch $1,330 an oz before the current quarter is over. The gold market has not regained the sparkle of 2008-late 2011, and is not expected to do so this year, too,” the study said.

Currently, the commodity is being traded at $1,260 an oz in the London spot market, and at about Rs 30,000/10g in India. Given the 10 per cent import duty and $120/oz premium, the price in Indian market is at least Rs 1,300 higher for every 10g.

by: Firozali Mullar from: Tanzania
January 25, 2014 12:36 PM
Guns. It sometimes seems, especially now, that we can’t talk about anything in American life without somehow, at some point, referencing the nation’s enduring obsession with guns. After the unspeakable horror of Sandy Hook (and the Wisconsin Sikh temple massacre, Virginia Tech, Columbine, Jared Lee Loughner’s 2011 slaughter in Tuscon, Chicago’s terrifying spike in gun-related violence in 2012 and on and on), the national conversation around gun rights and gun control has assumed an urgency that at times verges on desperation.

What the hell, everyone seems to be asking, can we do about the endless killing?

The numbers related to gun violence in the land of the free are, of course, deeply chilling. More than 8,500 Americans were murdered by guns (or rather, by killers wielding guns) in 2011, according to the most recent FBI data. Of those, 565 were under the age of 18; 119 were kids 12 or younger. Wherever one comes down on the gun debate, most sane people can agree that those statistics are a national disgrace and . . . well, insane.

But there are literally tens of millions of Americans who own and shoot guns entirely within the letter and spirit of the law. Hunting, for example, is a pastime and a rite of passage in countless communities around the U.S., and the vast majority of hunters — men and women, boys and girls — are not taking down deer and ducks and bears and doves with slingshots, or with bows and arrows. They’re using rifles and shotguns — as they have for generations.

Six decades ago, in its March 26, 1956, issue, LIFE magazine published a remarkable series of photos that accompanied an article titled, “Drawing a Bead on Safety.” Here, in hopes of providing at least a bit more context and a small measure of perspective on the nation’s gun debate, LIFE revisits those images and that article. After all, the central point of the current discussion around guns is how to make communities safer. Assuming that shotguns, at the very least, will likely be with us for a while, and that families and friends will continue to hunt together for the foreseeable future, lessons in how to shoot what one is hunting, rather than blasting oneself or one’s companions, will always have a necessary place in our gun-happy culture.

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