Libya entered 2021 as a divided nation aspiring for recovery and healing. With intensifying conflict and a blockade of oil terminals and fields, the economy registered one of the worst performances in recent records for the most part of 2020 . Starting in mid-September, a rapprochement between political/military factions brought much-needed relief to the economy, capping the GDP plunge at 31.3 per- cent, annually. The election of a unity government in early 2021 has rekindled hope, but, the reunification agenda faces formidable challenges ahead. Key conditions and challenges In 2020, Libya effectively remained a di- vided nation, where competing political and military factions operated redundant and often conflicting systems of governance. The Government of National Accord (GNA) controlled western regions around Tripoli and the Interim Government (IG), backed by the Libyan National Army (LNA), controlled other regions. The Central Bank in Tripoli controlled the country’s money supply and reserves, while the eastern branch mimicked its currency printing function. The National Oil Company in Tripoli was solely responsible for oil exports; but the Petroleum Facilities Guard, which protects oil assets, was di- vided between western and eastern forces. These divisions, with culminating coordination problems, have proven to be devastating for Libyans. A 9-month blockade that began in January 2020 cut the country’s crude oil output to an average 228,000 barrels per day during the blockade, less than one-sixth of 2019 values. For an acutely undiversified economy where hydrocarbons comprise over 60 percent of GDP and 90 percent of fiscal revenues, this dealt a heavy blow, leading to a near-complete scrapping of development expenditures. With severely limited health infrastructure and services after years of conflict, the COVID-19 pandemic added to the strife faced by Libyans. A recent World Food Programmed (WFP) World Bank (WB) survey showed that 10 percent of Libyans had inadequate food consumption in December 2020. Food insecurity was higher in the Eastern and Southern regions, with deteriorating trends in Tobruk, Murzuq and Alkufra since May 2020. There is reason for cautious optimism for recovery and healing, but downside risks abound. A ceasefire agreement of October 2020 helped resume oil production to 1.25 million barrels per day by December. In mid-November, parties also agreed to hold parliamentary and presidential elec- tions in December 2021 and commis- sioned a three-member Presidency Coun- cil to form a Government of National Uni- ty and facilitate the transition. However, the underlying political and economic divisions pose surmounting challenges and competing international influences can still derail the process. Recent developments For the most part of 2020, the performance of the Libyan economy was the worst in recent records. Even with the rebounding oil proceeds in the last quarter, the economy could not recover its earlier losses, and registered a 31.3 per- cent real decrease in GDP. On average, oil production in 2020 is estimated at 405,000 barrels per day, roughly a third of actual output in 2019 (Figure 1). Total fiscal revenues stood at LYD 23 billion in 2020, about 40 percent of those in 2019. The plunge in oil revenues translated.