The Libyan economy depends primarily upon revenues from the oil sector, which constitute practically all export earnings and about one-quarter of gross domestic product (GDP). In the early 1980s, Libya was one of the wealthiest countries in the world; it's GNP per capita was higher than that of countries such as Italy, Singapore, South Korea, Spain and New Zealand. Today, high oil revenues and a small population give Libya one of the highest GDPs per person in Africa and have allowed the Libyan state to provide an extensive level of social security, particularly in the fields of housing and education.

Compared to its neighbours, Libya enjoys a low level of both absolute and relative poverty. Libyan officials in the past three years have carried out economic reforms as part of a broader campaign to reintegrate the country into the global capitalist economy. This effort picked up steam after UN sanctions were lifted in September 2003, and as Libya announced in December 2003 that it would abandon programs to build weapons of mass destruction.

Libya has begun some market-oriented reforms. Initial steps have included applying for membership of the World Trade Organisation, reducing subsidies, and announcing plans for privatisation. The non-oil manufacturing and construction sectors, which account for about 20% of GDP, have expanded from processing mostly agricultural products to include the production of petrochemicals, iron, steel and aluminium. Climatic conditions and poor soils severely limit agricultural output, and Libya imports about 75% of its food. Water is also a problem, with some 28% of the population not having access to safe drinking water in 2000. The Great Manmade River project is tapping into vast underground aquifers of fresh water discovered during the quest for oil, and is intended to improve the country's agricultural output.

Under the previous Prime Minister, Shukri Ghanem, and current prime minister Baghdadi Mahmudi, Libya is undergoing a business boom. Many government-run industries are being privatised. Many international oil companies have returned to the country, including oil giants Shell and ExxonMobil. Tourism is on the rise, bringing increased demand for hotel accommodation and for capacity at airports such as Tripoli International. A multi-million dollar renovation of Libyan airports has recently been approved by the government to help meet such demands. At present 130,000 people visit the country annually; the Libyan government hopes to increase this figure to 10,000,000 tourists. Saif al-Islam al-Gaddafi, the oldest son of Muammar al-Gaddafi, is involved in a green development project called the Green Mountain Sustainable Development Area, which seeks to bring tourism to Cyrene and to preserve Greek ruins in the area