Tripoli, February 27, 2024 (Al-Anbaa Libya) – The Central Bank sent a letter to the Prime Minister of the National Unity Government, Abdul Hamid Al-Dabaiba, asking him to control the country’s public spending, and to prepare a unified budget for the state, otherwise the national economy will be exposed to major shocks during the coming period.
The bank stated in the letter addressed to Al-Dabaiba, “Your speech at the celebration of the anniversary of the February 17 Revolution included points related to financial conditions, the exchange rate, and salary increases, and these are sensitive points, and since the Central Bank of Libya is the economic advisor to the state in accordance with the legislation in force, it has become necessary for us to draw your attention.” To a number of points.
The bank stressed that there is no disagreement that Libyans have the right to live a decent life, and to receive salaries that guarantee a decent living, but this can only be achieved by good management of financial resources, while ensuring the sustainability of that decent life, and there is also no disagreement that oil is the source. The only income stream in the Libyan state, which finances the general budget by more than 95%.”
The bank addressed Al-Dabaiba by saying: You referred to the desire for the price of the dollar to be 1.3 dinars to the dollar, but the desire alone is not enough to achieve this, as the actual practices of successive governments were the opposite of that, as the ill-considered expansion in public spending over the past years, especially consumer spending, which takes over More than 95% of public spending, salaries alone constitute 60% of public spending, as the salaries item jumped from 33 billion dinars in 2021, to 65 billion in 2023, and the support item rose from 20.8 billion in 2021, including fuel subsidies, to 61 billion. During the year 2022, we expect it to exceed 61 billion dinars in the year 2023, of which 41 billion dinars are for fuel subsidies, which have grown remarkably and deplete approximately 8.5 billion dollars annually, not to mention other subsidy expenditures directed to the electricity sector directly at a value of 40 billion dinars, bringing the total expenditures. Direct and indirect support reaches 102 billion dinars annually.”
The bank wondered, “How did Chapter Four expenses jump from 20.8 billion dinars, including fuel subsidies, in 2021 to 61 billion dinars in 2022, which confirms the existence of an imbalance, distortion, and mismanagement in fuel subsidies,” noting that the state spent from 2021 until the end of 2023. Nearly 420 billion dinars, most of which were directed to consumer expenditures at the expense of development spending, generated pressure on the exchange rate of the Libyan dinar.
The bank added that Dabaiba directed in his speech to increase salaries and provide more grants, as the expansion of spending may satisfy some groups in the short term, but it contradicts the principles of financial sustainability and ensuring the rights of future generations, which is what rational management of public funds requires.
The bank wondered, “Where will the government provide financing for these increases, especially in light of the decline in the volume of expected revenues for 2024 to the level of 115 billion dinars, according to estimates by the National Oil Corporation, and five billion dinars in other sovereign revenues, for a total of 120 billion dinars.”
The bank added that continuing with the same financial policies will make the matter more complicated and result in a deficit. This certainly requires working together to take policies to avoid deficit financing.
He stressed that the expansion of parallel spending of unknown origin, which directly affected the increase in demand for foreign exchange in the last months of 2023, resulted in an increase in the parallel exchange rate despite the pumping of an amount of five billion dollars more than in 2022.
He stressed that moving from the exchange rate of 1.3 dinars to the dollar to 4.85 dinars to the dollar was not an option for the Central Bank, but rather was the result of successive crises since 2013, due to the arbitrary closure of oil, which caused the Libyan state a loss of about 150 billion dollars, accompanied by a defect in financial and trade policies and the state of… Political and institutional division, the growing pace of public spending, and the adoption of a deficit financing policy, which led to an increase in public debt and an exacerbation of the deficit in the balance of payments.
The bank stressed that there was no option to create balance and preserve the remainder of the first line of defense foreign exchange reserves, except by reducing the value of the Libyan dinar against foreign currencies, and this step achieved its goals and created clear stability during the years 2021 and 2022 at the macroeconomic level and the balance in the general budget. , the balance of payments and stability in the exchange rate of the Libyan dinar, andThe government’s continued increase in the level of public spending significantly, reaching the level of 165 billion dinars in 2023, and the presence of parallel spending from unknown sources, all of this contributed to the increase in the volume of demand for foreign exchange despite the Central Bank increasing the volume of supply of foreign exchange by five billion dollars. , compared to 2022, which amounted to $16 billion.
He explained that in light of these data, how could the exchange rate be 1.3 dinars to the dollar, according to the statement of the head of the National Unity Government, except by depleting the Central Bank’s reserves and resorting to borrowing from international institutions, which is not an easy matter, and undermines the state’s sovereignty and stability.
The bank stated that, based on its national duty and responsibility before the nation and the citizen, it will work to preserve the financial sustainability of the state in every possible way, whether individually or in cooperation with the rest of the state’s institutions.
The bank called on national institutions to work together to approve the necessary economic and financial policies to get out of this stifling crisis, which include stopping parallel spending from unknown sources, approving a unified budget for the entire Libyan territory, rationalizing spending in a way that preserves the state’s reserves and the rights of future generations, diversifying sources of income, and strengthening the role of The private sector, and reducing dependence on foreign imports of consumer goods, which exceeded 80%, The bank also demanded that oil production and exports be increased in the near and medium levels, and that the priority of spending be investment in comprehensive development.
The bank concluded its message by saying, “These fundamental facts must be stated, and as a matter of bearing historical responsibility and fulfilling the trust, the matter necessitates the necessity of working hard to get out of the crisis and reach the decent and sustainable life to which we all aspire.” (Al-Anbaa Al-Libya, Tripoli) S.H.
You can also read the news in the source from the Libyan News Agency
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2024-05-04 04:00:02
