Libya’s elected Parliament has slashed this year’s budget for the faction-ridden country by a fifth to $40 billion because a wave of worker protests in the first six months will mean lower oil revenues.
The House of Representatives, based in the eastern city of Tobruk while a rival assembly sits in the capital Tripoli, said spending would drop from 64 billion to 52 billion Libyan dinars.
Its statement late on Wednesday gave no estimate for the deficit.
Abdelsalam Ansiya, a senior lawmaker tasked with the budget, told Reuters last month the deficit could more than double to 19 billion Libyan dinars.
Ansiya said Parliament would not cut public sector salaries and subsidies that make up more than half of the budget. Instead, it would target ministerial and infrastructure spending since fighting among rival militias has made many projects impossible.
That might help the budget, but could also fuel discontent. Anger over poor schools and roads were among the grievances that led Libyans to overthrow strongman Muammar Gaddafi in 2011.
Ansiya also said last month that oil revenues would be only 17 billion dinars, down from a previous estimate of 26 billion as protests crippled production in the first six months.
Output has risen to around 800,000 barrels a day since the summer but this is still below the 1.4 million bpd Libya used to pump in July 2013 when protests broke out at export ports and oilfields.
Libya used to enjoy huge budget surpluses in the past but the country’s turmoil since Gaddafi’s fall -– due mostly to rivalry among competing militias and a weak central government – has taken a heavy economic toll.
The internationally recognised parliament elected last June has been challenged by the rival assembly set up by an armed group after seizing Tripoli in August.
The slump in oil revenues forced the central bank to eat into its foreign currency reserves, which were down to $109 billion by the end of June, the last reported figure, from $130 billion in August 2013.
The central bank, trying to stay out of the conflict risking to drag the country towards civil war, has limited budget spending to public salaries and essentials such as wheat subsidies. A huge repair bill from the Tripoli fighting is also waiting. The old airport terminal, the runway and much of the civilian air fleet were damaged during the fighting in Tripoli in July and August.