Is our economy fine or not!? “Mohsen Al-Darija” answers with numbers

The economic expert, Dr. Mohsen Al-Darija, spoke to the Sada Economic newspaper about the situation of the Libyan economy and his expectations regarding it. He said: I think our economy was treated during the previous three years as middle-income years, but in fact these years had high oil income, and compared to the past, they were supposed to To be years of prosperity and saving. Unfortunately, the idea that prosperity comes with an increase in salaries and grants is a wrong idea, because Libya imports almost everything from abroad. It was correct to focus on purchasing power and make adjustments to the salaries of low-income people, such as the basic pension, and increasing groups suffering from low income for specific sectors and not for sectors. Completely without sectors, as happened, and the sound alternative to raising all salaries is to work to increase purchasing power. This treatment to improve income even helps combat inflation, which has now eaten up salary increases and more due to the significant increase in the amount of the Libyan dinar compared to the foreign currency available through the sale of oil.

He continued, saying: The result now is the presence of a terrible amount of Libyan dinars. The budget has now reached 165 billion dinars. Therefore, when there is a decline in oil prices, we will face a big problem, which is how to cover the budget. If we imagine that Libya’s oil income is 15 billion dollars, how do we cover, for example, the salaries item that It reaches 12 billion dollars at the official exchange rate, fuel subsidies that reached 13 billion dollars, other support items such as medicines and materials used in the health sector exceeded 3 billion dollars, and the management budget, which is estimated at the equivalent of about 4 billion dollars. These are basic expenses that require the price of oil to be in the range of 75 to 80 dollars per barrel at least, adding that the reform that was easy in the past will now become more difficult and this is caused by wrong policies.

According to Al-Darija, this measurement of reserves and savings in itself is a problem, and this means that you are preparing yourself to consume savings, adding: It is true that we have good reserves, but spending large amounts of money will make you return to the reserve and you will eliminate it within a year or two, and after that, what do you do when No reserves and no ability to cover the budget?

He also added: To say that Tunisia has only $7 billion in reserves and is well off compared to the Libyan case, this is because it is an exporting country with a value of $21 billion a year and 90% of its exports have nothing to do with oil, but rather are manufactured materials as well as agricultural products, but we only have oil. If the price of oil decreases, the economy suffers, and we need much larger reserves than Tunisia, which obtains foreign currencies from various sources and is not as exposed to the fluctuations of the oil market as Libya is. There is a fluctuation in oil prices and the Libyan economy is very sensitive to this fluctuation.

He continued by saying: It is not possible and unsound to set an annual budget based on the fact that the price of oil will always remain 80 to 100 dollars per barrel, and we have witnessed its decline to 25 dollars per barrel during the past ten years, wondering what we will do if the price of oil decreases and income becomes 8 or $9 billion?

Al-Darija concluded by saying: The meaning of the word reserves is free funds (liquid or semi-liquid foreign currency that is used in the budget when needed) which the central bank can use to address short-term crises, and there is no country that calculates its reserves by calculating all its assets in the foreign currency it has. Reserves are, by definition, used to confront fluctuations in income to cover the short-term deficit and are not a substitute for it. To simplify the idea, let us take as an example a citizen who has income from his work but faces some seasonal income fluctuations. The citizen saves an amount during the period of high income to confront the lack of income during other periods, if the person spends All his income during the period of increase, what will he do during the period of decline? Should he sell his house under the pretext that it is reserves or savings? I think everyone realizes that this is irrational and will lead to poverty.

You can also read the news in the source from the Sada Economic newspaper