Secular and religious agree on need for Libya’s gradual energy subsidy reform

The secular and religious worlds have come to agreement on the need for Libya to gradually reform its fuel subsidies in the unlikely bedfellows of the International Monetary Fund (IMF) and Libya’s (western region) Grand Mufti (the highest religious authority).

‎Dar Al-Ifta, the highest religious body, released a video clip last Thursday (24 July) of the Grand Mufti of Libya, Sadeg al-Ghiriani, basing his religious recommendation on Libya’s fuel subsidy reform on the IMF’s study published this month entitled “Energy Subsidy Reform in Libya”.

Speaking on the problems of Libya’s economy, the Mufti said ‘‘the first step to reforming the waste of public money that Libya is currently experiencing is to lift the (energy) subsidies, almost half probably more, of which go to the money of criminals and smugglers’’.‎

‎Drawing on the IMF Al-Ghariani continued ‘‘The report issued by the IMF calling for the lifting of energy subsidies is a study by international experts, the government should take advantage of it and gradually lift subsidies, as the report suggested, as there is no country in the world where gasoline and energy are sold at the price that it is sold at (LD 0.15 / US$ 0.09 per litre) in Libya’’.‎

Lack of trust in government – fear of failure to compensate for subsidy removal
Dealing with some of the opposition Libyans have to the introduction of fuel subsidy reforms, the Grand Mufti said Libyans ”should not let their emotions carry them away by saying they fear if subsidies are removed the government will not live up to its promise to substitute it with a direct cash payment (equivalent to their realistic average annual consumption of fuel).

‘’Do Libyans agree to at least a third of their state budget being wasted away, robbed by thieves for illicit use and profligacy? This (continued squandering of public money) is not appropriate to the behaviour of any wise, Muslim or human being’’, he added.

‘‘I therefore call on the (Tripoli based Libyan) government to open this topic again based on the IMF’s report and work on gradually lifting the (energy) subsidies, as suggested in the IMF report until energy prices reach their real (market) price’’.

The IMF study on Libya’s energy subsidy reform
It will be recalled that, and as reported by Libya Herald, the IMF report had stated that energy subsidies have become a significant burden on government finances in Libya.

The study said the pervasive nature of subsidies has led to rampant corruption, smuggling, and a diversion of resources from essential public services.

The paper identifies key barriers to reform, including opposition from vested interest groups and public apprehension regarding inflation and welfare loss.

To address these challenges, a strategic reform plan is proposed, emphasizing a phased approach, a comprehensive communication plan and social protection measures to mitigate the adverse effects of subsidy removal. By taking these steps, Libya can transition towards a more sustainable framework that supports macroeconomic stability, the IMF study stated.

.

IMF study entitled “Energy Subsidy Reform in Libya” concludes that reform is crucial as subsidies lead to overconsumption and premature resource depletion

Fuel subsidies reached LD 60 billion, 30 percent of which is smuggled – therefore can invest just LD 5 bn in housing: CBL Governor Issa

Audit Bureau 2023 Annual Report: 2023 state subsidies amounted to LD 68.5 billion

Libya loses about US$ 12 billion annually in smuggled subsidies: Aldabaiba

Decision to remove fuel subsidies has been taken: PM Aldabaiba (libyaherald.com)

NOC chairman Bengdara says his organisation is not a security force to combat fuel smuggling (libyaherald.com)

Aldabaiba forms ministerial committee to study mechanism for fuel subsidy reform – again (libyaherald.com)

Supreme Council for Energy adopts NOC 2023-2027 plan, including alternative energy project (libyaherald.com)

Supreme Council for Energy Affairs holds first meeting (libyaherald.com)

At Gharian cabinet meeting, Aldabaiba explains fall in black-market value of dinar and resounds alarm over fuel subsidies (libyaherald.com)

Fuel quantities, smuggling and subsidy reform – and increased oil production through PPP discussed at summit meeting (libyaherald.com)

Alternatives to fuel subsidies with cash payments delivered to Aldabaiba (libyaherald.com)

Prime minister Aldabaiba forms Ministerial committee to study reforming fuel subsidies, orders payment of family grant, increases pensions (libyaherald.com)

Libya’s Economic Reform Salon proposes reforms for the country’s fuel subsidies | (libyaherald.com)

Fuel subsidy reform proposal presented to Serraj government | (libyaherald.com)

Libya reduces subsidies on commercial-use kerosene | (libyaherald.com)

Subsidies are seen as an entitlement by Libyans: GNA Planning Minister | (libyaherald.com)

Government to reduce petrol subsidies | (libyaherald.com)

Cash for goods subsidy reform adopted by Tripoli authorities | (libyaherald.com)

Subsidy reform: petrol prices to be increased by 200% | (libyaherald.com)

2014 Budget commits government to subsidy reform by Jan 2015 | (libyaherald.com)

The 2014 Budget: Subsidies up – despite deficit and oil exporting crises | (libyaherald.com)

2014 budget expected to be LD 68.59bn – salaries and subsidies shoot up | (libyaherald.com)

Unemployment, subsidies, undiversified economy, stifled private sector – problems of Libyan economy: WB | (libyaherald.com)

Fuel subsidies removed over 30 months in three stages – Economy Minister Abufunas | (libyaherald.com)

Subsidy reform: Smugglers are the ones prospering from subsidies – Zeidan | (libyaherald.com)

Cabinet meeting forms committee on subsidies – Zeidan | (libyaherald.com)

Oil minister says fuel subsidies to go by 2016 | (libyaherald.com)