The secular and religious worlds have come to agreement on the need for Libya to gradually reform its fuel subsidies in the unlikely bedfellows of the International Monetary Fund (IMF) and Libya’s (western region) Grand Mufti (the highest religious authority).
Dar Al-Ifta, the highest religious body, released a video clip last Thursday (24 July) of the Grand Mufti of Libya, Sadeg al-Ghiriani, basing his religious recommendation on Libya’s fuel subsidy reform on the IMF’s study published this month entitled “Energy Subsidy Reform in Libya”.
Speaking on the problems of Libya’s economy, the Mufti said ‘‘the first step to reforming the waste of public money that Libya is currently experiencing is to lift the (energy) subsidies, almost half probably more, of which go to the money of criminals and smugglers’’.
Drawing on the IMF Al-Ghariani continued ‘‘The report issued by the IMF calling for the lifting of energy subsidies is a study by international experts, the government should take advantage of it and gradually lift subsidies, as the report suggested, as there is no country in the world where gasoline and energy are sold at the price that it is sold at (LD 0.15 / US$ 0.09 per litre) in Libya’’.
Lack of trust in government – fear of failure to compensate for subsidy removal
Dealing with some of the opposition Libyans have to the introduction of fuel subsidy reforms, the Grand Mufti said Libyans ”should not let their emotions carry them away by saying they fear if subsidies are removed the government will not live up to its promise to substitute it with a direct cash payment (equivalent to their realistic average annual consumption of fuel).
‘’Do Libyans agree to at least a third of their state budget being wasted away, robbed by thieves for illicit use and profligacy? This (continued squandering of public money) is not appropriate to the behaviour of any wise, Muslim or human being’’, he added.
‘‘I therefore call on the (Tripoli based Libyan) government to open this topic again based on the IMF’s report and work on gradually lifting the (energy) subsidies, as suggested in the IMF report until energy prices reach their real (market) price’’.
The IMF study on Libya’s energy subsidy reform
It will be recalled that, and as reported by Libya Herald, the IMF report had stated that energy subsidies have become a significant burden on government finances in Libya.
The study said the pervasive nature of subsidies has led to rampant corruption, smuggling, and a diversion of resources from essential public services.
The paper identifies key barriers to reform, including opposition from vested interest groups and public apprehension regarding inflation and welfare loss.
To address these challenges, a strategic reform plan is proposed, emphasizing a phased approach, a comprehensive communication plan and social protection measures to mitigate the adverse effects of subsidy removal. By taking these steps, Libya can transition towards a more sustainable framework that supports macroeconomic stability, the IMF study stated.
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