CBL: Need for ‘‘difficult and painful’’ austerity measures to avoid ‘‘threats to Libya’s future stability’’

By Libya Herald reporter.

Malta, 16 January 2015:

As first revealed by Libya Herald yesterday, the CBL has revealed . . .[restrict]its plans to introduce some deep austerity measures in order to solve Libya’s deep economic problems.

In its statement released late yesterday, the CBL referred to its earlier statement of 8 December 2014 ‘‘on the weakened state of Libya’s public finances, the heightened risks facing the country and mounting threats to Libya’s future stability’’.

‘‘Reflecting its responsibility to inform the public and provide advice to policymakers’’, the statement continued, ‘‘the Central Bank is calling for immediate action, however difficult and painful, in order to contain the widening fiscal deficit and protect the well-being of ordinary citizens’’.

Libya’s fiscal position 2013-14 (Billions of Libyan Dinars)

The CBL then set out a ‘’set of policy measures that need to be taken to rationalize spending and contain the growing fiscal crisis’’ including:

1. Addressing the 2014 budget deficit in a manner consistent with the laws and regulations governing public finance.

2. Immediate implementation of the National Identification System in all public financial transactions.
3. Establishing effective mechanisms for the collection of tax revenues and customs duties.

4. Immediate review of all government provided subsidies for goods and services.

5. Postponement of new education and training scholarships abroad as well as new diplomatic assignments.

6. Reducing the size and costs of government diplomatic missions abroad.

7. Addressing the wage bill of public sector companies that are funded by the Ministry of Finance.

8. Reviewing the structure of the wage bill of the public sector and postponing the payment of family and child allowances.

9. Immediate review of commercial policies responsible for the large import bill and the drain of international reserves.

10. Immediate review of the existing system and processes for government funded medical treatment abroad.

In concluding its statement the CBL called ‘‘on all concerned parties to cooperate in dealing with the growing crisis and alert the public about the dangers facing the country in order to restore stability and protect Libya’s future’’.

It is noted that the official statement by the CBL calling for the introduction of austerity measures looks like a watered down version of some of the more extreme policies discussed, including the sacking of all illegally appointed personal since 2011, the drastic cutting down of diplomatic personnel appointed since 2011, the halving of salaries.

It will be interesting to see if the two contending political factions of Libya of the only internationally recognized government of Abdullah Thinni and the House of Representatives on the one hand, and the GNC/Libya Dawn faction on the other, will accept or have the political will and executive ability to implement these austerity measures.