A new medium-term country risk assessment for Libya

End-October 2024, the CMSR prepared a new medium-term country risk assessment for Libya, following its own country risk assessment methodology.

We classify Libya’s as a country with a high medium-term country risk (D), however it is bordering on very high risk.

The CMSR assigns the assessed country to one of five risk categories:

·         A - Minimal medium-term country risk

·         B - Very limited medium-term country risk

·         C - Limited medium-term country risk

·         D - High medium-term country risk

·         E - Very high medium-term country risk

In addition to the final country risk assessment, each country risk category, i.e. political, economic and financial risk, is also classified into one of these five risk categories.

Libya's medium-term political risk, even if it succeeds in forming a temporary unity government, will remain very high. Tensions between the two rival governments will continue and there are several rival armed groups and foreign mercenaries present in the country. Continued internal fighting in neighbouring Sudan additionally increases security risks. We assess that there is a likelihood that an interim, unity government could be established in the short term, followed by presidential and parliamentary elections by the end of 2025, and a formation of a single permanent government in 2026. The risks to this forecast are high. Disagreements between the House of Representatives and the High Council of State on electoral legislation could hamper efforts to agree on a new government and thus postoponing elections. The risk of the country returning to civil war is still present. The establishment of a unity government and the eventual holding of elections would remove some of the political uncertainty, however, the country will nevertheless continue to be torn by internal unrest and rivalry between the two governments at least until 2026, with disagreements between different groups and occasional clashes continuing beyond that. The worst-case scenario would be the one in which the political strife escalates into a protracted competition for power and makes reconciliation initiatives impossible. International political actors, on the one hand the US and the EU, on the other Russia and other countries (Turkey), will remain present in the country, mainly because of its strategic geopolitical position and its rich oil resources.

Medium-term economic risk is high, and financial risk is limited (but close to high medium-term risk). Economic risk would be higher if Libya did not have high GDP growth and budget and current account surpluses. Financial risk is mitigated by low external debt and debt service accompanied by very high foreign exchange reserves.

Given the current situation in Libya, we do not expect an increase in bilateral cooperation in the short term. It will remain limited to trade in goods, which will remain modest, and we do not expect direct investment by Slovenian companies. If the situation in the country stabilises, there are also many opportunities for Slovenian companies in Libya to engage in higher forms of cooperation, however, political support will be needed for that.

Libya Medium-Term Country Risk Assessment can be ordered at:

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