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By Sami Zaptia.
Amman, Jordan, 12 May 2014:
The 2014 Libyan . . .[restrict]budget totaling LD 58.92 bn, approved by the GNC Finance and Budget Committee last week was expected to be approved by the whole GNC on Sunday.
However, the GNC decided to postpone the budget debate on Sunday in view of the fact that the new Prime Minister elect, Ahmed Maetig, was still not confirmed in his position and had yet to propose his new cabinet.
Speaking to Libya Herald Sunday, GNC members also thought that the 2014 budget was too high in view of the sharp decline in oil exports. They though it should be reduced further. Gemenis GNC member Abdullah Gmati, for example, told this paper that for the time being the new budget should aim to pay salaries only.
If the GNC is really going to cut the 2014 budget further, the GNC has not revealed where these cuts are going to be implemented. It is clear that the cuts will not come in the sensitive salaries chapter (one) totaling LD 18.73 bn. This has already been reduced compared to 2013 (LD 20.78).
The introduction of the new National ID number in 2013 was thought to be the solution to reducing the duplication of salaries. However, the improper implementation of the National ID number has meant that the salaries section of the budget was still too high.
Some savings in the budget could be shaved-off chapter two – operational expenses – totaling LD 9.04 bn which is also down on the LD 10.77 bn figure of the 2013 budget. The biggest decrease in the 2014 budget came in the development and projects chapter (three) – down to LD 14 bn in 2014, from LD 19.30 bn in 2013.
Unfortunately, this could be the most likely candidate for drastic cuts, being the least politically sensitive area of the budget. It is also worth noting that although in 2013 LD 19.30 bn was allocated in the budget for development and projects, very little was actually spent on development and projects.
It will be recalled that the then Prime Minister, Ali Zeidan, was forced to seek permission, which he received, from the GNC to transfer funds from this chapter to cover salaries as the effect of the oil export embargo cut oil revenues.
Another area for possible cuts could be the subsidies chapter four. This has been allocated LD 13.10 bn in 2014, up from LD 10.60 bn in 2013. Alarmingly, and no doubt to the consternation of both the IMF and World Bank, this is the only area of the budget that has not been reduced. This has come as a surprise, in view of all the noises the government has been making regarding subsidy reform – including the muted fuel smart cards.
A detailed look at the breakdown of the LD 13.10 subsidy chapter will ring alarm bells in the Washington DC offices of the IMF and World Bank.
| The chapter four subsidies section of the 2014 budget |
LD billion |
|
| 1 | Medicines | 0.7 |
| 2 | Foodstuffs | 1.5 |
| 3 | Fuel | 6.3 |
| 4 | Electricity | 0.8 |
| 5 | Water & Sanitation | 0.2 |
| 6 | Water desalinization | 0.01 |
| 7 | Public hygiene | 0.051 |
| 8 | Animal feed | 0.03 |
| 9 | Fertilizers | 0.006 |
| 10 | Child benefit | 3.0 |
|
Total: |
13.10 |
A large amount of the proposed 2014 subsidies, nearly half, will go to fuel. A large chunk of this hugely subsidized fuel ends up in Libya’s neighbouring states and not benefiting the average Libyan. The amount of fuel smuggling has increased multi-fold as the weak Libyan state is no longer able to deter smuggling.
Libyan subsidies 2013/14
| Total 2013 budget LD 66.86 bn | LD 10.61 bn |
| Total 2014 budget LD 58.92 bn | LD 13.10 bn |
The subsidy section of the 2014 budget is the only section that has increased compared to 2014 – despite Libya going through an oil exporting crises.
The LD 6.3 bn subsidy on fuel means, as the IMF has been at pains to point out, “weigh on government budgets at the expense of much needed investment in healthcare, education and infrastructure”. The IMF also says that fuel subsidies “tend to encourage capital-intensive industries to the detriment of employment-intensive activities”. Subsidies also “foster overconsumption”. [/restrict]
