By Michel Cousins.
Tunis, 5 September 2015:
Libya’s reliance on oil as its sole source of income threatens it with imminent financial ruin, . . .[restrict]leading Misrata businessman Mohamed El Muntasser has told the Libya Herald.
With production down to around half a million barrels and the oil price languishing at less than $50 a barrel, the country now faced a massive budget shortfall.
Muntasser, a key speaker in this weekend’s Libya National Dialogue Development Forum in Tunis, said the problem was not just about oil. The previous governments of Abdurrahim Al-Kib and Ali Zeidan had increased the state’s salary bill massively, both in the number of people on the payroll and the size of their incomes.
Under Qaddafi, he pointed out, there had been some 900,000 people employed by the state with a total salary bill of LD 8 billion. That had now risen to 1.4 million being paid by the state at a cost of LD 23 billion. The figure includes those in militias. The average salary before the revolution was LD 700-800 a month. Now it was LD 2,000 to LD 3,000, he said.
Additionally there was the issue of subsidies. They were costing Libya LD 12 billion. Together they now amounted to LD 35 billion a year, Muntasser explained.
In comparison, the best estimate for Libyan oil production in the short term future was 1.5 million barrels a day, he believed. It had the potential to go higher, but that would take major investment and time, he stated.
After taking into account production and other costs, which had risen, this would mean an income of $18 billion a year plus another $4-$5 billion a year for gas. At the official exchange rate that was some LD 31 billion – not even enough to pay for the salaries and subsidies. “How do we manage to pay for security, to rebuild the damaged infrastructure, and provide free education and healthcare, not to mention all the government’s other responsibilities?” Muntasser asked.
The first thing a new government should do, he said, was to phase out the subsidy system. Instead financial support should go to the poorest in society.
Getting rid of subsidies would also help the security situation, Muntasser suggested. If fuel, electricity and other commodities were sold at a market rate, it would end the smuggling almost overnight – and so much of Libya’s conflicts were the result of smuggler rivalries, he pointed out.
Cutting government the government’s payroll had to be another priority, he said. Tunisia, with double Libya’s population, had only 500,000 state sector employees; Libya has 1.3 million, he pointed out. “We have to reduce it. We cannot carry on like this.”
One early move should be to cut Libya’s legion of diplomats, he suggested. “We have some 130 embassies abroad” and almost all, he said, were massively overstaffed. “They have 300 percent more than they need.” Staffing should be cut by at least half. Even the most important embassies – such as in Tunis, Cairo, Rome and London – need more than 20 diplomats. Medium one should have no more than 12 and in small ones, the maximum staff should be eight.
One way of kick-starting the economy and getting Libyans back into work, he believed, would be to reactivate the 4,000 small and medium size projects planned towards the end of the Qaddafi regime – in housing and infrastructure. These should be given to small Libyan companies to complete, and they could be incentivised by giving them tax breaks.
Likewise, he suggested encouraging Libyan doctors to return to Libya by giving them loans to build and operate their own hospitals and clinics.
Anther suggestion was to hand over the major unfinished housing projects to the banks. They could complete them and then provide loans to young Libyans to buy them.
Other radical economic ideas need to be embraced, Muntasser added. “We’re heading for a bad [economic] time”, he warned. There had to be new thinking. [/restrict]
