Economist Mohamed Al-Safi wrote:
Dissecting Libya’s financial time bomb: excessive public spending (at unsustainable levels), declining revenues (due to structural leakages), rising public debt (driven by money printing), and energy subsidies (severely misallocated).
Foreign reserves act as a temporary safety buffer, while the length of the “fuse” depends on oil shocks or price booms.
Trigger 1: The trillion-dinar burn rate. Total public spending reached one trillion dinars between 2012 and 2024, with wages tripling (from 18 billion to 62 billion). Energy subsidies accounted for 40% of revenues in 2022, alongside dual spending in 2024 totaling 224 billion dinars.
Trigger 2: The subsidy trap (and leakages). Energy subsidies are expected to reach $17 billion in 2024 (35% of GDP), while spending on education and healthcare remains below 1% of total expenditure. Indirect subsidies must also be taken into account.
Infrastructure deterioration, climate impacts, and traffic accidents further exacerbate the situation.
Trigger 3: Public debt – a monetary overdose. What began as a spending deficit has evolved into high inflation, with a sharp rise in debt and weak monetary policy tools.
Trigger 4: Declining revenues. Oil and gas account for 98% of the budget, while non-oil revenues remain weak. There are losses and leakages in revenues (such as electricity and taxes), lack of accountability, inability of many institutions to demonstrate profit or loss, and long-standing transparency issues.
Conclusion: A simultaneous systemic failure characterized by excessive spending, poor resource allocation, monetary inflation, and near-total dependence on oil—making a unified budget an unavoidable necessity.
Reasons for optimism: growing awareness among elites of the risks, unprecedented international attention, attempts to impose discipline on obstructive actors, and efforts to avoid the oil boom trap.
Oil booms lead to excessive spending, while oil shocks result in deficits, followed by debt and pressure on reserves.
Public concerns: Where will the funding come from? What guarantees are in place? Why the lack of transparency in the figures?
Success factors: unifying and controlling public spending, directing all oil revenues to the treasury, halting money printing, reforming the accounting system, targeting inflation, improving coordination and planning, increasing non-oil revenues, and addressing wages, subsidies, and loss-making state-owned enterprises.
Final message: The financial time bomb still exists. The unified budget is the only path to sustainability—but it requires safeguards to prevent elite capture, continuation of the current situation, and depletion of reserves.
