Speaking at today’s session on ‘‘Financial Rebalancing and Addressing the Foreign Exchange Deficit’’ at the 6th Banking Sector Development Forum held in Tunis from 7 to 8 December, former Central Bank of Libya Board Member and former Deputy Finance Minister, Mraja Ghaith, said ”reforming the state subsidy system requires political will, and that this will is lacking in Libya’s current state of political division. Who dares to replace subsidies?”, he asked.
Scaremongering by current beneficiaries of subsidies
He said ‘‘everyone imagines that if subsidies were replaced, all hell would break loose. Yet, subsidies on some goods were eliminated (cooking oil, tomato paste, sugar, flour, pasta, rice, tea), and nothing changed. This is merely an excuse used by those benefiting from the current subsidies’’.
Only 10 percent of current subsidies are reaching the poor
Ghaith added that ‘‘all studies indicate that 90% of subsidy beneficiaries are from the wealthy classes, while only 10% reach the poor. Someone who owns five or three cars, or has twenty air conditions in their home—are they considered poor? No! Subsidies were fundamentally designed to help those with limited incomes cope with the cost of living, and that is the true meaning of subsidies.’’
Current subsidies are a distribution of state resources to all Libyans
‘‘What is happening now is not subsidies, but rather a distribution of state resources to all segments of the Libyan population. We cannot call it subsidies. Even in healthcare, there is support allocated for those with specific illnesses, but it is directed only to those who truly need it. If someone is healthy, why should they receive this type of support?’’
Subsidy support should be based on income and for low earners only
‘‘The logical solution is to define income levels who qualify to receive subsidy support. For example, someone with an income of 3,000 dinars or less needs subsidy support, even if it’s at a manageable level. It was found that this amount is around 1,850 dinars, covering goods, clothing, and medicine. So, someone with an income of 1,850 dinars or less receives full subsidy support, while someone with a higher income can receive partial support of 10%, 15%, 20%, or even 50%.
But it’s completely illogical for everyone to receive subsidy support in the same way. Let us take myself as an example. As a former Deputy Minister of Finance, I get LD 8,000 per month. Do I deserve subsidy support the same as a retiree receiving only 900 dinars per month? That’s not fair.
I’m saying that support should be directed only to those who need it. This person receives subsidy support, but not the currently implemented general subsidy’’.
Previous studies show subsidies can be lifted incrementally and over years
‘‘But in the current circumstances, who has the political will to make this decision? We’re not trying to reinvent the wheel. There are many examples of countries that gradually lifted subsidies over three to five years. It didn’t happen overnight. It’s not necessary for the entire plan to be implemented during one specific government’s term; it’s enough to lay the foundation, and those who come after can complete it.
What we need is a strong political will that clearly states: This bleeding must stop, and subsidy support must be directed to the poor and vulnerable groups in cash, and the recipient is free how they spend it. What is happening now is a distribution of income, not subsidy support’’.
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The 6th Banking Sector Development Forum will be held in Tunis from 7 to 8 December
World Bank to participate in 4th Annual Libya Banking Development Forum
4th Banking Sector Development Forum to be held in Tripoli in October 2022 (libyaherald.com)
Annual Libyan Banking Sector Development Forum to be held in Tunis (libyaherald.com)
Second Libyan banking forum to be held in Benghazi (libyaherald.com)
