(Adds oil exports figure, background, details)
By Ulf Laessing and Feras Bosalum
TRIPOLI, June 11 (Reuters) - Libya's government, suffering from dwindling oil revenues, will allow its ministries to begin spending the $50 billion budget it submitted to parliament at the start of the year even though lawmakers have not voted on it.
The move might force the central bank to dip deeper into its reserves because the oil revenues that used to finance the budget have fallen to $1 billion a month, a quarter of what Libya used to make in the past.
Ten months of protests at oil facilities have reduced oil output to around 200,000 barrels a day, down from 1.4 million bpd in July when protests started.
The OPEC producer's parliament has failed to agree on a 2014 budget proposal worth around 60 billion Libyan dinars ($50 billion), according to lawmakers. The draft is slightly smaller than the 2013 budget worth 66.8 billion dinars.
Public finances could worsen in next few weeks after acting oil Minister Omar Shakmak said on Wednesday Libya had started directing crude from its two offshore fields to supply the Zawiya refinery, key to providing the capital with petrol.
The government gave no new export figure but this will bring exports closer to zero. The two fields had been the last left unhindered by protests.
"The country can produce 1.5 million bpd, but it was practically 100,000 bpd a few days ago, and I'm afraid now is even less," said Bernardino Leon, EU Special Representative for the Southern Mediterranean told a conference in Brussels.
BUDGET CUT SENSITIVE
The cabinet of caretaker Prime Minister Abdullah al-Thinni said in a statement late on Tuesday that it considered the budget draft, submitted in January, as valid after parliament had exhausted the legal limit of fours months to vote on it.
"The government considers the budget approved," it said.
Mohamed Abdullah, head of parliament's budget committee, signalled support. He told Reuters the General National Congress (GNC) was willing to work with the finance ministry to use the budget without a formal vote as long as recommendations from lawmakers were included.
Other deputies said parliament, heavily divided, should still vote on the budget.
"In my opinion the budget should be adopted as soon as possible," said Hamed al-Hattah, a lawmaker from the south.
The central bank holds around $110 billion in foreign reserves but only part of the money is cash, with the rest held in overseas bonds, deposits or equity stakes.
Libya is in turmoil as the government and parliament struggle to control militias who helped oust Muammar Gaddafi in 2011 but now defy state authority and seize oil ports at will.
Cutting the budget is difficult became more than half of the budget goes on subsidies and salaries for a greatly overstaffed and inefficient public service, a legacy of Gaddafi who put most adults on the payroll to discourage opposition.
The government has been reluctant to cut back as it struggles to impose authority on a country awash with arms.
($1 = 1.2075 Libyan Dinars) (Reporting by Ulf Laessing and Feras Bosalum; Additional reporting by Ahmed Elumami and Francesco Guarascio in Brussels; Editing by Toby Chopra/Ruth Pitchford)
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