Fuel Subsidies in Libya

Former Oil Minister Shukri Ghanem in 2003 unveiled proposals for economic reform, including plans to cut some $5 billion worth of subsidies, following decades during which the state had been subsidising 93 percent of the value of basic commodities, notably fuel. In May 2005 there a 30 percent hike in fuel prices and 6 percent increase in diesel prices was introduced. This had a great impact on Libyan citizens, particularly as there were few public transport alternatives available for travel purposes.

Later, as a short-term response to the aspirations created by the 2011 revolution, the interim government in Libya raised wages and subsidies. According to a 2012 IMF Report, spending on wages and subsidies in Libya is projected to increase to 30 percent of GDP. The paper warns that in the medium to long term, if the level of recurrent spending is inconsistent with appropriate budgetary prioritisation, it could lead to a damaging appreciation of the exchange rate, warning that the spending pattern was undermining prospects for fiscal sustainability.

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