Libya's economy has undergone a gradual process of liberalisation by the government since 2004. This came in the form of the issuance of regulations for the privatisation of certain government-owned enterprises and private businesses are allowed to operate in the country.

Being an oil producer, Libya is especially vulnerable to the fluctuations in the international oil prices. Import restrictions have often resulted in shortages of basic foodstuffs.

The lifting of U.S. sanctions on Libya (2004) saw a flurry of interest by oil companies looking to expand production in the country. Libya currently produces less than half its 1970 high of 3.3 million barrels a day. The country's proven reserves of oil are estimated at a modest 30 billion barrels, compared with 113 billion barrels in Iraq, but some analysts indicate that its actual reserves could be much larger. Libya planned in June 2004 to boost its crude oil output on a short-term, or "surge," basis to 1.62 million barrels a day, an 8%, or 112,000 b/d, rise from the May 2004 level. The country expects to increase its oil production capacity to two million barrels a day in four or five years. Shell, Talisman, Statoil, ENI and Pioneer, amongst others, have begun, or have expressed an interest in production in the country. ConocoPhillips, Marathon and Amerada Hess, which make up the Oasis Group, are seeking an extension of their expiring leases that were left dormant since 1986 when expanded U.S. sanctions forced them to pull out of Libya. In December 2003, the National Oil Company (NOC) said it had awarded a US $102.2-million oil and gas exploration contract to a consortium which includes Australian, Greek and Spanish firms. The consortium will search for oil and gas in the block M15 in the Marzouk area and blocks 515, 542, 550 and 564 in the region of Syrte.

Libya has promoted the formation of a regional economic union with its neighbours. The proposed union would ultimately result in an integration of national economies as well as common monetary and fiscal policies. The short term goal of the union would be an encouragement of investment in sectors such as agriculture and fishing. The Libyan government is also involved in efforts to promote its tourism sector.