Libya budget cuts to offset oil losses on cards

Tripoli - Libya must slash its budget by a third and halt infrastructure funding to offset the loss of oil revenues due to a nine-month shutdown of major ports and oilfields, the head of parliament's budget committee said.

Protests at oilfields and ports since last July have knocked oil production down to 200 000 barrels per day (bpd) from 1.4 million bpd, hitting the sole source of budget revenue.

The weak central government is unable to disarm militias and tribesmen who helped overthrow Muammar Gaddafi in 2011 but have kept their weapons to make political and financial demands.

Parliament proposes to cut the budget to 44bn Libyan dinars from an initially planned 68.6bn dinars to focus on salary payments and ministry spending, Mohammed Abdullah, head of the budget committee, told Reuters late on Sunday.

He said funding for new infrastructure and other development projects would be halted for now. "It is very difficult to launch a development plan in the absence of a new government," Abdullah said.

Prime Minister Abdullah al-Thinni resigned a week ago after just a month in office, saying gunmen had tried to attack his family.

More than half of the budget goes to 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 has been reluctant to cut back as it struggles to impose authority on a country awash with arms.

Cuts in infrastructure projects risk fuelling social tensions. Libya needs to replace and repair roads, universities and schools damaged during the 2011 uprising.

The government reached a deal earlier this month with rebels in the east to end their blockade of four oil ports, but so far only the Hariga terminal has reopened.

The reopening of the Zueitina port, planned two weeks ago, has been delayed due to damage during the long blockade, Justice Minister Salah al-Merghani said on Sunday.

Talks with the rebels to restart exports from the eastern Ras Lanuf and Es Sider ports will start only after the Zueitina terminal has been reopened, he said.

A different set of protesters has halted most oil production in the west of the vast desert country. Talks to reopen major western oilfields have gone nowhere.