By Libya Herald staff.
Tripoli, 11 July 2014:
Prime Minister Abdullah Al-Thinni has said that the national fuel subsidy has . . .[restrict]had a huge negative impact on the economy and has confirmed that the government is looking at ways to phase out the concession.
Thinni and Ministers from Social Affairs, Communications and Finance met at the Prime Minister’s offices yesterday with representatives from the National Oil Corporation (NOC) to discuss removing it. The government said the subsidy had reached LD 365 million per month, adding that this figure was rising year on year.
The Prime Minister said that given the economy’s reliance on oil, the current policy was untenable. He said that petrol was now cheaper than water and this had led to an epidemic of petrol smuggling to neighbouring countries, along with a number of other associated problems.
In the event, the meeting decided that it would be difficult to remove the subsidy in one go. It would continue but with gradual reductions for petrol and other fuels.
Thinni said a balance had to be struck so that those who were most in need of the subsidy were not hit hard by the change. He said, however, that subsidies had to be rationalised to ease the burden on the state budget.
Subsidies and price stabilisation costs of LD 11.93 billion were included in the LD 59.95 billion budget which was approved by the General National Congress (GNC) last month. Of this LD 7 billion was set aside for fuel subsidies. Petrol in Libya currently sold at LD 0.15/litre. This is more than Libya spends on healthcare.
Hardwired into the 2014 budget is a commitment to substitute the current goods and fuel subsidies for cash subsidies, setting a deadline of 1 January 2015. Article 24 of the budget which sets the deadline stipulates that the reform should be within clear aims that provide social and economic stability.