3. Bolster Libyan Economy

of further fragmentation and lay the foundation for the development both of strong central and local institutions in the future.xiii As

a major donor to existing stabilization efforts, the United States has an important role to play in shaping the international community’s approach. The United States should lobby the UN to articulate a clearer medium-term

strategy for decentralization and support to municipal authorities, under which the various international efforts can align.

2.vi: Prioritize technical and financial support to central Ministries within existing U.S. decentralization programs

The UN’s Stabilization Fund for Libya (SFL) has provided material and technical assistance to municipalities attempting to restore public services; however, building the capacity of the central Ministry of Planning to manage municipality priorities has proved more challenging, with corruption and capacity issues hindering attempts to disburse funds to municipal levels or to enhance central oversight of service delivery. In addition to the SFL, a number of countries (including the United States) run concurrent local stabilization programs, many of which focus on working with municipal authorities in an ad hoc way. Without concurrent support to strengthen the capacity of central Ministries, these efforts risk undermining prospects for a well-functioning, unitary state.

The United States should consider prioritizing U.S. technical and financial support to the Ministries of Planning and Local Government, within existing decentralization programs, to strengthen their capacity to oversee decentralized service delivery and distribute municipal revenues.

3. LIBYAN ECONOMY

There is growing Libyan acknowledgment that the persistent “economy of theft” is the most significant obstacle to state functioning.xiv However, there is also increasing international recognition that economic issues, including Libya’s “war economy,” represent a potential area for incremental progress. The United States has already taken a leadership role in convening economic dialogues aimed at making progress on economic reform; our recommendations below are aimed at

strengthening the effectiveness of U.S. intervention in this area. The struggle for access to money, liquidity, and oil revenues is also a major contributor to Libya’s security sector challenges. Steps to improve the management of this sector would render it more difficult for militia actors to

pillage state coffers, thereby reducing the returns to military contestation. Above all, policies aimed at improving financial management and centralized control of oil revenues have potential to meaningfully reduce the returns to subversion of key Libyan institutions such as the Central Bank and

Libyan-Investment-Authority.

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