Central Bank of Libya Monetary Policy Committee member \u201cAyoub Al-Farsi\u201d wrote an article in which he said:<\/p>\n\n\n\n
Amid the chaos of economic discourse, and the democracy of media platforms that almost eliminates specialization, I write\u2026<\/p>\n\n\n\n
In a rentier state, classical economic tools lose their effectiveness and become tools for managing the crisis rather than solving it. Monetary, fiscal, and trade policies become hostage to oil revenues. When oil prices rise, the state expands spending, and when they fall, it adopts arbitrary austerity policies that harm social stability, or maintains the same level of spending at the expense of the strength of the currency.<\/p>\n\n\n\n
Economic Policy Performance Under the Rentier Model:<\/strong><\/p>\n\n\n\n 1. Trade Policy:<\/strong><\/p>\n\n\n\n It becomes a system for facilitating the import of consumer goods rather than promoting exports or protecting local production, which is virtually nonexistent in the first place.<\/p>\n\n\n\n Therefore, Libya’s dilemma lies in the #structural_framework<\/strong> governing the economy. It is impossible to adjust exchange-rate policy or rationalize subsidies in an environment that produces nothing but oil, because any change in the exchange rate, for example, will immediately be absorbed by the market through inflation, given the country’s complete dependence on imports for food, medicine, and all necessities of life.<\/p>\n\n\n\n #Culture_of_Dependence: The Merchant and the Employee<\/strong><\/p>\n\n\n\n The true failure of the Libyan rentier model is embodied in its creation of a \u201cdistorted social and economic contract,\u201d in which everyone has become consumers and dependents on oil rents without providing genuine added value to the national economy:<\/p>\n\n\n\n The public-sector structure (administrative inflation):<\/strong> Public employment has become a tool for distributing rents rather than for production. Salaries consume the largest share of national income, creating massive disguised unemployment that burdens the budget without generating any developmental returns.<\/p>\n\n\n\n The commercial sector (the letter-of-credit economy):<\/strong> Even the private sector, which is supposed to be the engine of growth, has been distorted by the rentier system. A large segment of merchants has become \u201cintermediaries in documentary letters of credit,\u201d profiting from exchange-rate differentials and banking privileges while engaging in import-driven consumer trade that creates neither sustainable jobs nor supports local manufacturing or value chains.<\/p>\n\n\n\n 2. Fiscal Policy and Consumption Threatening Sustainability<\/strong><\/p>\n\n\n\n One of the most prominent manifestations of this structural failure is the fact that consumer expenditures\u2014salaries, subsidies, and operating expenses\u2014consume most of the state’s general budget year after year.<\/p>\n\n\n\n This structural imbalance leaves only a very small share for development and investment spending. Even when such spending exists, it often lacks the competitive vision needed to create a parallel economy that does not depend on oil. A state that consumes its budget simply to manage the present is a state that #eats_its_future_capital<\/strong>, leaving future generations hostage to fluctuations in a global energy market that is rapidly moving toward clean alternatives.<\/p>\n\n\n\n 3. Monetary Policy: The Dilemma of Fiscal Dominance<\/strong><\/p>\n\n\n\n Under the rentier model, monetary policy relies on massive foreign-currency inflows to defend the local currency. Because governments tend to spend, monetary policy suffers from unplanned fiscal dominance. In Libya, this dominance has turned into an uncontrolled situation that hinders stabilization efforts, compounded by institutional and political division.<\/p>\n\n\n\n Dependence on rent in this model means that all this spending is financed by the state’s oil revenues, while government revenues make little contribution despite the large scale of commercial activity.<\/p>\n\n\n\n Now we come to the reason for this introduction: an attempt at a reversed reform that starts with the outcomes rather than the causes, in a scene that reflects the chaos of economic discourse and the democracy of modern media, which almost eliminates specialization in favor of economically #stupid_AI, vested interests, and those seeking economic trends.<\/p>\n\n\n\n Roadmap: Gradual, Systematic Reform<\/strong><\/p>\n\n\n\n The transition from this failed system to a sustainable one cannot be achieved through sudden decisions or \u201cill-considered economic shocks.\u201d Rather, it requires systematic and gradual structural reform based on clearly defined five- and ten-year plans.<\/p>\n\n\n\n This is the natural progression of all successful international transformation processes. (The saying \u201cFrom Libya comes the new\u201d has no place in economics. We have heard enough economic innovations that leave reason and science astonished by their audacity.)<\/p>\n\n\n\n As shown in the accompanying diagram I prepared for simplification, the natural stages of structural transformation are:<\/p>\n\n\n\n 1. First Stage (Economic Diversification as the Main Key):<\/strong><\/p>\n\n\n\n The first five-year plans should focus on creating alternative productive sectors\u2014manufacturing, smart agriculture, logistics, tourism, and renewable energy\u2014through genuine partnerships with the local and international private sectors.<\/p>\n\n\n\n 2. Second Stage (Achieving Added Value):<\/strong><\/p>\n\n\n\n Redirecting bank credit and documentary letters of credit to support investors and manufacturers who provide added value and create genuine employment opportunities, while stopping facilities granted for the senseless importation of luxury goods.<\/p>\n\n\n\n 3. Third Stage (Adapting Economic Policies):<\/strong><\/p>\n\n\n\n After establishing the foundations of a diversified and competitive economy, it becomes possible\u2014and safe\u2014to adapt monetary policies, such as the exchange rate, and fiscal policies, such as redirecting subsidies toward those who deserve them or converting them into production incentives, without fear of social or inflationary collapses.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" Central Bank of Libya Monetary Policy Committee member \u201cAyoub Al-Farsi\u201d wrote an article in which he said: Amid the chaos of economic discourse, and the democracy of media platforms that almost eliminates specialization, I write\u2026 In a rentier state, classical economic tools lose their effectiveness and become tools for managing the crisis rather than solving […]<\/p>\n","protected":false},"author":13,"featured_media":257717,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"iawp_total_views":0,"footnotes":""},"categories":[683],"tags":[613],"class_list":["post-257716","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economic-articles","tag-libya"],"acf":[],"yoast_head":"\n