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Libya struggles to pay bills as protests slash oil revenues

Source: Reuters - Sun, 23 Feb 2014 22:24 GMT
Author: Reuters
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(Adds details on parliament evacuation)

By Ulf Laessing and Feras Bosalum

TRIPOLI, Feb 23 (Reuters) - Some Libyan government ministries are struggling to cover expenditures because of budget problems, a minister said on Sunday after protesters shut down another vital oilfield in the OPEC producer.

In the latest sign of turmoil gripping Libya since Muammar Gaddafi's ouster in 2011, heavy shooting near the General National Congress (GNC) building interrupted a national parliament session and forced legislators to evacuate.

Militias and armed protesters seized ports and oilfields over the last seven months to press demands on the central government. Oil and gas exports are the sole source of the government budget and to fund food imports.

Oil output fell to 230,000 barrels a day on Sunday after a new protest shut down the El Sharara field, down from 1.4 million bpd in July when nationwide protests started.

Western powers fear Libya will slide into greater instability if budget problems worsen. More than half of the budget goes to public salaries and subsidies.

"The financial situation of the government is difficult," said Culture Minister Habib al-Amin, who acts as a government spokesman. "Some ministries have been unable to pay for expenditures due to a lack of budget and liquidity."

Amin warned vital government services such as health care and electricity supplies were at risk unless the GNC assembly agreed on a budget for 2014.

The government has submitted a budget draft to the GNC but did not release details. Analysts say it will be difficult to overcome a funding gap as oil revenues might halve this year compared to the typical level of around $50 billion.

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The oil production situation worsened over the weekend, when state-owned National Oil Corp (NOC) said it had been forced to close the 340,000 bpd El Sharara oilfield due to new protests.

With giving details, Habib said clashes in the area made it impossible to restart output at the field.

NOC put production at 230,000 bpd, down from 275,000 bpd a week ago. It gave no export figures but Libya needs to feed its 120,000 bpd Zawiya refinery and 20,000-bpd Tobruk refinery to meet domestic fuel demand.

The government has put pressure on tribal leaders in eastern Libya to persuade an armed group seeking greater autonomy to lift a blockade of three ports that previously handled 600,000 bpd. Talks have gone nowhere so far.

There has been no progress toward reopening Hariga port in the east.

Prime Minister Ali Zeidan has said the government will act against the oil unrest, but analysts say the army is too weak to tackle heavily armed protesters.

Violence erupted late Sunday when anti-aircraft guns were fired in the vicinity of the GNC's building, prompting evacuations.

GNC spokesman Omar Hmeidan said lawmakers had been debating two militias who threatened last week to dissolve parliament, tapping into popular frustration that Libyans are tired of a lack of progress in the country's transition toward democracy.

The United Nations helped defuse the situation, but the two militias brought fighters into the capital last week. Details about the shooting were not immediately available. (Additional reporting by Ghaith Shennib and Ahmed Tolba; editing by Andrew Roche and Amanda Kwan)

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