Al-Sharif Writes: “Proposed Remedies for Economic Imbalances and Inflationary Pressures in Libya”

Professor of Economics at the University of Benghazi Ali Al‑Sharif wrote in a post:

In light of ongoing economic developments, and the resulting vicious cycle represented by the devaluation of the dinar accompanied by an increase in nominal revenues, followed by an expansion in public spending and its direct reflection in rising inflation rates, there is an urgent need to adopt a package of integrated measures within the framework of a unified state and a coherent economic policy. Foremost among these measures is working to reduce and control public spending in line with the level of real revenues, in a way that limits fiscal imbalances and eases inflationary pressures. It also becomes necessary to prepare an import budget limited to essential and basic goods only, with the aim of rationalizing demand for foreign currency and reducing unnecessary imports.

Al-Sharif continued: With regard to the five basic commodities, at the current stage they can be addressed through a price-balancing fund, ensuring the provision of an effective social safety net that protects low-income groups from the effects of inflation and rising prices. In addition, it is necessary to tighten control over letters of credit and ensure that imported goods actually enter the domestic market, thereby reducing waste and the misuse of foreign currency resources. The importance of establishing a fast and transparent mechanism to benefit from the returns on frozen Libyan assets also stands out, while emphasizing that unfreezing them at the present time should be avoided, in order to achieve an additional source of income without exposing the state to legal or political risks. In the same context, there must be a focus on improving the efficiency of the National Oil Corporation, whether by increasing production or enhancing operational performance, which would contribute to boosting oil revenues and improving the efficiency of the general budget.

He added: It is also necessary to tighten control over border crossings to curb smuggling and to improve customs collection mechanisms in a way that supports non-oil revenues. The economic situation likewise requires regulating migrant labor, which has become one of the sources of pressure on demand for currency, goods, and services, along with reconsidering the quasi-free benefits it enjoys, in order to achieve greater fairness and economic efficiency.

He concluded his post by saying: Finally, identifying the informal economy and gradually integrating it into the formal economy represents a fundamental step to benefit from its capacities, expand the revenue base, and improve the effectiveness of economic policies.