The International Monetary Fund stated yesterday, Monday, that Libya needs an economic strategy that clearly outlines the path forward. This will be an opportunity to work on improving the utilization of oil revenues, diversifying the economy, and moving away from the policies of the Gaddafi era, which promoted rent-seeking behavior, corruption, and government opacity.
The IMF added that the success of reforms will depend on achieving a stable political and security environment, developing institutional capacities, and focusing structural reform efforts on enhancing institutions and the rule of law to protect against risks arising from declining oil revenues and potential loss of reserves. Authorities should also avoid excessive spending when the economy is doing well and prioritize savings during times of economic slowdown. To achieve this goal, Libya urgently needs a transparent budget that reduces costs associated with high public sector wages and subsidies.
The IMF pointed out that public sector salaries dominate government spending, with approximately 2.2 million people virtually employed in the public sector. Subsidies and grants account for about a quarter of expenditures. Fuel support poses a particular problem, as the local price of gasoline is 3 cents per liter, the second-lowest price in the world.
With the resumption of IMF surveillance in Libya, we will continue to provide advice and support on policies to help strengthen the economy and prepare for reconstruction after the conflict, according to the International Monetary Fund.
