Challenges and Obstacles in Implementing Energy Subsidy Reform Policies in Libya According to International Experiences

Abstract

This paper his paper aimed to identify the factors that contribute to the success and failure of various subsidy reform programs by studying the experiences of 17 countries that implemented energy subsidy reform programs. These experiences varied between success, failure, and failure. By extracting the factors that contributed to the success and failure of these programs, the study concluded that the distorted structure of the Libyan economy requires structural solutions for reforms to work as required. In a rentier economy and a lack of diversification, any policy that does not take these features into account will have negative effects on the economy. In the absence of social safety nets and the disappearance of commodity subsidies for citizens, lifting or replacing fuel subsidies without a comprehensive reform package will exacerbate existing problems and fuel inflationary pressures. The study also concluded that the obstacles to the successful implementation of subsidy reform programs, in accordance with the reform cycles studied, are present in the Libyan case. These include unstable growth, currency instability, weak government quality, and a lack of public confidence in government policies. The study recommended assessing the market's fuel needs to prevent a significant surplus in the supplied quantities. It also recommended establishing an electronic system that sets a monthly ceiling for stations and tracks the quantities sold in the local market on a real-time basis. It also recommended controlling borders and preventing fuel smuggling to neighboring countries, as the security problem cannot be solved by lifting subsidies and increasing citizens' suffering in light of the current economic conditions facing the country. Furthermore, the issue of subsidies and energy pricing must be kept away from political disputes and conflicts, as this will lead to the failure to implement reform programs across Libya. The study also recommended developing an accurate database on Libyan households and their income levels and establishing a mechanism to identify the private sector and its workers.