Strengthening Libya’s fiscal framework would enhance macroeconomic resilience. Reported inflation stayed low despite the depreciation of the parallel exchange rate. Avoiding the procyclical spending bias and strengthening Libya’s fiscal framework would enhance macroeconomic resilience and reduce volatility in activity and output. In the absence of conventional monetary policy tools, controlling fiscal expenditure would be the preferred response consistent with Libya’s macroeconomic policy framework. Promoting financial stability and strengthening monetary policy requires a comprehensive reform of the banking sector.
