Tripoli: Libya’s economy has taken a heavy hit since rebels blockaded export terminals last summer, slashing all-important oil revenues, but it has enough reserves to weather the storm for now, analysts and politicians say.

Rebel seizure of four terminals in July in pursuit of a campaign for restored autonomy for the eastern Cyrenaica region slashed output from 1.5 million barrels per day to just 200,000 bpd.

Last month, the government reached a deal to regain control of the terminals, and took over two of them with a combined capacity of 210,000 barrels per day. But it has not recovered the remaining two, which have a much larger capacity of 550,000 bpd.

As a result, exports are far from recovering and have only reached 240,000 bpd, according to the National Oil Corp.

Libya, which relies on oil for 96 per cent of its GDP, says the blockade has cost the country more than $14 billion (€10.1 billion) in lost revenues.

On a monthly basis, the central bank estimates revenues have plunged from $4.6 billion to only $1 billion.

That is a serious matter for a country that imports nearly all of its basic needs, including refined petroleum products, food and other goods and services, at a monthly cost of $3.5 billion, says central bank spokesman Issam Al Oul.

But thanks to its significant reserves, Tripoli has been able to make up the difference and should be able to for a bit more than another four years at current rates, Oul says.

Reserves now stand at $113 billion, compared with $132 billion at the beginning of the crisis.

The Nato-backed revolution that ousted long-time dictator Muammar Gaddafi in late 2011 took a heavy toll on Libya’s economy, which has still not recovered.

And with the latest crisis, a recent International Monetary Fund-World Bank assessment forecast that a contraction of GDP that reached 5.3 per cent last year would widen to eight per cent in 2014.

And the outlook beyond this year was grim, centring on the danger of continuing disruptions to oil production, which “could degrade Libya’s output infrastructure” and broader political instability.

“Turmoil is likely to further weaken the state and its institutions, and exacerbate shortages of basic services, particularly law and order,” the report says.

“Trust in government could erode further in the context of political and sectarian polarisation as well as weakening state institutions, to create a vicious circle of declining legitimacy and effectiveness.”

In that context, it said “the combination of hydrocarbon output disruptions and runaway spending could deplete Libya’s financial reserves in less than five years.”

But it says the reserves will “help weather the crisis in the short term.”

One example of how political uncertainty is affecting policy is that, with the month of May already half gone, the government has still not adopted a budget for the year.

However, the General National Congress is due to vote Sunday on a proposed budget of $48 billion, which represents a slight reduction from $51 billion in 2013, said Mohammad Al Dharrat, chairman of the GNC’s budget and finance committee.

Based on a forecast production of only 800,000 bpd and an average price of $100 a barrel, that implies a budget deficit of $8 billion.

But while the drop in foreign exchange earnings from reduced oil exports has caused a problem, “neither is the situation catastrophic,” said an international economist who asked not to be identified.

“There has been a drop in revenues, but the country can hold out thanks to its reserves,” he said.

But he warned against the dangers of a shortage of dollars in the domestic market, which could create inflationary pressures.

“The dollar is now changing hands in the black market at more than ten points above the bank rate, which is a revealing indicator.”

He was referring to an exchange rate of 1.38 dinars to the dollar this week, compared with the official rate of 1.25.

“That could lead to speculation and to a rise in prices, which would have a negative influence on all the macro-economic indicators.”

In the end, university economics professor Mohammad Al Houni said that “despite the budget deficit, the economy can bounce back quickly, given its immense petroleum riches.”

Medium-term, the IMF said “restoration of security is a precondition for a growth in economic activity.”

For Libya “to move away from dependency on oil to a sustainable path, it would be necessary to create the conditions for diversified, private sector-led growth.”