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Libya Approves Overdue Budget as Eastern Oil Port Reopens

Source: Reuters 6/22/2014, Location: Africa

Libya's parliament approved the overdue 2014 budget worth $47 billion, drawing on reserves to offset a dramatic loss of oil revenue after almost a year of protests at major ports.

The North African country is in turmoil as the government struggles to control militias who helped oust Muammar Gaddafi in 2011 but now defy the state and seize oil facilities at will.

Almost a year of protests at the oilfields and ports have reduced oil output to a fraction to the 1.4 million bpd it was in July when the strikes started. Parliamentary spokesman Omar Hmeidan said lawmakers approved the 56.5 billion Libyan dinars ($47 billion) budget submitted by the government in January.

They delay had been caused by lawmakers trying to trim spending. However, cutting the budget is difficult because more than half of it goes on subsidies and salaries for a greatly overstaffed and inefficient public service, a legacy of Gaddafi who put most adults on the payroll to discourage opposition.

The government put pressure on lawmakers to approve the budget by saying last week it would start using it after the legal limit for debate had been exhausted.

It will be largely funded by drawing on surpluses worth 8 billion dinars, a central bank reserve fund of 16 billion dinars - originally intended as a buffer for future generations - plus 26 billion dinars in oil revenue, said Mohamed Abdullah, head of the budget committee.

Oil revenue typically makes up 95 percent of the budget in the absence of a sizable non-oil industry. However, relying on oil revenue of 26 billion dinars sounds optimistic as Libya only made 4 billion in the first four months of the year, a quarter of what it usually makes.

While Libya's eastern Hariga oil port reopened on Sunday and the western El Feel oilfield ramped up output, lifting national production to 270,000 barrels a day, the central bank could still be forced to dip into its foreign reserves to fund the budget.

The budget committee based the budget for 2014 on an annual oil production of 600,000 bpd.

The central bank holds around $110 billion in foreign reserves but only part of the money is cash, with the rest held in overseas bonds, deposits or equity stakes.

The draft is slightly smaller than the 2013 budget worth 66.8 billion dinars.

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