Meanwhile, the Libyan Arab Foreign Investment Company, which is concerned with Libya's investments outside the banking sector, announced plans to invest $500 m in Italy last year, and expressed further interest in buying shares in leading Italian companies. The confidence exemplified by these overseas investments has been boosted by the government's ability to deliver balanced budgets for the last three fiscal years.

The fact that areas of major expenditure, such as the Great Man-made River Project (GMR), and infrastructure developments in the energy sector, fall within figures allocated from these budgets can only be a cause for optimism. UN sanctions have, of course, had certain effects, but these have not been enough to stop the investments detailed above, or to stop the Libyan government from proceeding with its ambitious plan to share the country's oil wealth with the citizens of Libya. Budget provision for a direct revenue redistribution system was approved by the General People's Congress in 1995.

Positive GDP growth rates in 1997 suggested that, for the first time since multilateral sanctions were introduced in 1992, the state was enjoying a return to positive GDP growth rates. The recent slump in the oil markets has dampened that short spell of optimism. Oil is by far the country's largest revenue earner, with 96 per cent ($9.6 bn) of Libya's hard currency receipts in 1997 deriving from oil profits. The slump hit Libya hard in 1998, when oil earnings fell by over a third, prompting oil minister Abdullah al- Badri to call on OPEC for further cuts in production to bolster prices, while the government has introduced an austere budget for 1999. However, the economy is expected to regain its health in the near future. The International Monetary Fund (IMF) estimates GDP growth to rise to 2 per cent in 2000, considerably closing the gap with its Arab neighbours.

Some signs of economic reform, together with a reduction on certain foodstuff subsidies, has been seen recently. In particular, the GPC has encouraged the expansion in the operations of private banks: 1996 saw the appearance of the first private bank to be established since 1969. However, given the current economic climate, the government remains cautious about introducing far reaching reforms too quickly, preferring to ensure that the foundations for economic growth are well established first.

Britain has not had diplomatic relations with Libya since 1984, and has maintained only an Interests Section in Tripoli. The UN Security Council (UNSC) imposed trade sanctions on Libya on 15 April 1992. UNSC resolutions 748 (31 March 1992) and 883 (11 November 1993) set out selective sanctions mainly affecting the aviation and oil sectors, details of which are available from the Certification & Liaison Department of the Arab-British Chamber of Commerce, or from the DTI's Sanctions Unit.

Central Bank, Tripoli

It is important for UK exporters to note that, for the time being, there is no export credit guarantee cover available through any of the recognized channels (such as ECGD). However, any company whose commodity or service is outside the scope of sanctions is still free to use its own commercial judgment and trade with Libya if it wishes.