Evaluating the Efficiency of Public Expenditure on Rural Infrastructure and Its Impact on Enhancing Spatial Development in Libya: An Econometric Analytical Study for the Period (2023–2012)"

Abstract

This study aims to evaluate the efficiency of public development expenditure (Chapter Three of the general budget) in stimulating rural spatial development in Libya over the period 2012–2023, with a particular focus on the role of inflationary erosion in weakening the purchasing power of the Libyan dinar. The study adopts a time-series econometric methodology, relying on official data from the Libyan Ministry of Planning and the Bureau of Statistics and Census. Four main analytical tools are employed: the Inflation Erosion Coefficient (IEC), Arc Elasticity, the Compound Annual Growth Rate (CAGR), and a Log‑Log regression model augmented with a dummy variable to absorb structural shocks during the 2015–2018 period.

The results reveal that the IEC declined from 100% in 2012 to only 39% in 2023, implying a loss of 61% of the dinar’s purchasing power in development allocations – reflecting an unprecedented fundamental inflationary gap. The adjusted regression model indicates a positive and statistically significant elasticity of 1.64, confirming the high sensitivity of the rural sector to real investment. Conversely, the dummy variable exhibits a negative and significant impact during the turmoil period, indicating an additional decline in agricultural output of approximately 56% due to infrastructure destruction. The study concludes that intermittent financing and accumulated inflationary erosion constitute the two most obstructive structural barriers to sustainable spatial development. The study recommends establishing a sovereign spatial development fund insulated against inflation, transitioning to performance‑based, multi‑year program budgeting, and attaching a national indicator to monitor the erosion of the dinar’s purchasing power to every annual budget.