Libya: risk assessment
Sovereign risk Currency risk Banking sector risk Political risk Economic structure risk Country risk
August 2010 BB BB B B BB BB
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Stable. Libya is unlikely to have difficulty meeting its modest debt-service obligations, given large official and unofficial foreign-exchange reserves, strong economic growth prospects and relatively high oil prices.
Positive. Huge foreign-exchange reserves, which stood at US$97bn in March 2010—equivalent to over 45 months of import cover—are more than sufficient to support the currency in the event of a major external shock.
Banking sector risk
Stable. The Central Bank is in the process of privatising the banking sector and increasing foreign participation. Excess liquidity in the banking system has resulted in increased lending by government institutions, reducing risk but making it more difficult for private banks to lend to the private sector.
Delays to political reform and inconsistent government decisions could increase resentment towards the ruling elite. Saif al-Islam Qadhafi has been put forward for a high-ranking political position, which could help to allay these concerns.
Economic structure risk
The overwhelming economic dependence on oil revenue leaves Libya exposed to volatile oil prices. Although a nascent non-oil sector is beginning to emerge, unpredictable policymaking poses a persistent threat to development.
SOURCE: Country Risk Service