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Internal conflict and plunging oil prices are strangling Libya's economy

Libya is rapidly joining the ranks of Africa's better-known failed states: Central African Republic, Somalia and South Sudan. The north African country, once boasting one of the continent's highest per capita GDPs, is a shadow of its former self: torn apart by armed conflict and now felled by falling oil prices and declining production.

More than three years since the NATO-backed toppling of Colonel Muammar Qaddafi, Libya "may exist as an entity of international law but, in reality, it doesn't exist anymore," said Slimane Zeghidour, political analyst with France's TV5 Monde. "There is no authority recognised by even half of the country."

Islamist militia groups control the capital, Tripoli, and Benghazi, the second-largest city. The internationally recognised government of Prime Minister Abdullah al-Thinni has fled to Tobruk, a port city in the east.

The conflict has taken a heavy toll on the economy of north Africa's biggest oil producer. "GDP growth is estimated to have fallen by almost 30% last year, mostly driven by a sharp decline in oil production (down 51% in 2014 from 2013) and oil exports (down 75% in 2014 from 2013)," said Marouane El Abassi, the World Bank's resident representative to Libya.

Libya's official Parliament - still in Tripoli at the time - approved the latest budget, worth 56.5 billion Libyan dinars ($41.6 billion), in June 2014. The budget was based on projections of 26 billion Libyan dinars ($19.1 billion) in oil revenue and an annual oil production of 600,000 barrels per day (bpd) at $100 a barrel, Mohamed Abdullah, the head of the budget committee, told Reuters at the time.

But two months after the budget was approved, Libya Dawn (an alliance of Islamist militias close to the Muslim Brotherhood) chased Mr Thinni's government from Tripoli and the country lurched towards civil war.

By the end of 2014, amid fighting between official government troops and Libya Dawn militias for the control of key oil fields, terminals and ports, oil production was down to less than 300,000 bpd, according to the IMF. This is less than a fifth of the 1.6m bpd Libya was pumping before Mr Qaddafi was toppled in 2011.

Plunging oil prices since mid-2014 have dealt a second blow to Libya's economy. "The budget was made on the assumption that the oil price would stay at $100 per barrel," said Mohammed El-Qorchi, IMF mission chief for Libya. "But the situation is different now that the price has dropped."

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Libya: Internal Conflict and Plunging Oil Prices Strangling Economy