Libya warns of budget problems as protests slash oil revenues

Militias and armed protesters who helped topple Qaddafi in 2011 have seized ports and oilfields over the last seven months

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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.

Militias and armed protesters who helped topple Muammar Qaddafi in 2011 have 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 General National Congress (GNC) assembly agreed on a budget for 2014.

The government has submitted a 2014 budget draft to the GNC but not released any 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.

More protests

The oil production situation worsened on 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.

Habib said clashes in the area made it impossible for now to restart output at the field, without giving details.

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 which previously handled 600,000 bpd. Talks have gone nowhere so far.

There has been no progress towards 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.

In another sign of the turmoil in the country, the GNC evacuated its building on Sunday after reports of anti-aircraft guns being fired in the area, a deputy told Reuters. No more details were immediately available.

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