TRIPOLI: Libya’s economy has made a swift recovery after the 2011 conflict, with oil production returning to near normal levels, but insecurity is holding up reconstruction and keeping foreign companies at bay. The economy nose-dived after the Feb. 17, 2011, uprising against Moammar Gadhafi, which escalated into a full civil war that ended with the longtime dictator’s ouster and death in October.

Oil production, which was more than 1.6 million barrels per day before the war, came to a virtual halt by the summer of 2011, after foreign companies and their workers fled en masse.

But the oil sector, which accounts for 80 percent of gross domestic product and 97 percent of exports, bounced back quickly after Gadhafi’s fall, and production returned to near pre-conflict levels in May.

“In one year [since October 2011], average oil production has surpassed 1.4 million bpd and sometimes reaches 1.6 million bpd,” Oil Minister Abdelrahman ben Yezza told AFP.

“We were able to resume production quickly and generate income for the country,” he said, stressing that oil “was and remains virtually the only source of income” for the authorities.

Only a few international companies rushed back after the interim authorities announced the “liberation of the country” on Oct. 23, 2011, three days after Gadhafi was captured and killed.

“The resumption of production was made possible thanks to the quick return of major Western companies, like Total (France), ENI (Italy), Repsol (Spain), Wintershall (Germany) and Occidental (U.S.),” said a Tripoli-based economist working for an international financial institution.

Such companies, he added on condition of anonymity, are providing their own security on production sites, some of which are in remote desert areas beyond the grip of security forces.

In 2013, Tripoli hopes to lure back more oil companies, many of which have been waiting for greater stability to return, and encourage local enterprises to resume, said the minister.

In its October economic forecasts, the International Monetary Fund estimated that real GDP growth in Libya will be 122 percent this year and 16.7 percent in 2013 after plunging by 60 percent last year.

The Tripoli-based economist said “performance of the post-conflict economy is undeniably positive,” noting in particular a gradual decrease in the inflation rate and the stable exchange rate of the Libyan dinar against other currencies.

He said inflation has been hovering around 15 percent in recent months after hitting record highs in 2011, when it touched nearly 30 percent in October.

The IMF said inflation for all of 2012 should be down to 10 percent and to an almost negligible 0.9 percent next year.

The economist also noted some “persistent gaps” in the economy, including a “weak banking sector,” which offers absolutely no financing options for companies and where there are also still problems with international transactions.

Even such a basic thing as cash is a problem. Many banks do not issue bank cards and, even in major cities like Tripoli and Benghazi, there are only a handful of ATMs.

In the absence of strong control by the transitional authorities, who are struggling to build up state institutions and rein in the militias who were the backbone of the anti-Gadhafi war, the “informal sector takes precedence over the formal sector,” he added.

“But this is completely normal in a post-conflict situation,” he explained.

Imports, which had come to a virtual halt due to an embargo slapped on Libya by the U.N. and Western powers, have boomed thanks to the lifting of restrictions and lowering of taxes.

This change has been heartening for Libyan merchants like Khaled al-Fallah. “Today we have the freedom to take part in any activity,” he told AFP, noting that the market before was monopolized by only a few people.

But businessman Anas al-Maghrabi would like better regulation of imports.

He says small traders are flooding the market with imported products and overwhelming the ports, causing significant delays in delivery.

With its oil wealth and vast reserves, the largest in Africa, Libya is a natural magnet for foreign companies looking to profit from the reconstruction of a country destroyed by war and 42 years of corruption and mismanagement.

But construction sites are at a standstill, with most foreign construction companies still not having resumed work. Hotel and housing projects that predated the conflict are in limbo while the cities worst damaged by the fighting, including Sirte and Misrata, are crying out for reconstruction.

The onus is now on the new authorities to persuade foreign companies that the North African nation offers enough political stability and security for them to resume their activities.

“Before asking foreign companies to come back, we must first guarantee their security,” outgoing Deputy Prime Minister Mustafa Abu Shagur told AFP recently.