The policy of lifting fuel subsidies in Libya: causes and consequences

Abstract

This study aims to analyze Libya's fuel subsidy removal policy by exploring the reasons behind the government's proposal and assessing its economic and social repercussions. The research relies on an analysis of economic data, government reports, and previous studies on energy subsidies, focusing on their impact on the public budget and the local economy.

The findings indicate that generous fuel subsidies burden the public budget, lead to resource waste and exploitation by unintended beneficiaries, encourage fuel smuggling to neighboring countries, and further strain the local economy. Any modification to the subsidy policy must be accompanied by exchange rate reforms to ensure the effectiveness of the measures and mitigate the effects of inflation.

The study recommends converting in-kind subsidies into direct cash transfers for the most vulnerable groups, increasing transparency and communication with the public, stimulating local investment in the energy sector, and expanding social protection programs to mitigate the impact of rising prices on vulnerable households.