[1] introduction

For at least 15 years, debate has been and continues to be raised from time to time about lifting commodity subsidies in general and fuel subsidies in particular. Focusing on the price of gasoline, it is noted that in most cases, if not all, the result that follows the discussion is to maintain the current price of a liter of gasoline, which is (0.15 LYD). Even when it is decided, one day, to increase this price to (0.20 LYD). This increase was cancelled, and the price was returned to its level (0.15 LYD), as if this price was included in the download and could not be affected.

In this article, we will shed some light on this rigid price by evaluating it in dollars. We will also take a look at gasoline prices in other countries and in neighboring countries for the purpose of comparison and highlighting the phenomenon of smuggling associated with it. Then we will present a proposal for the first stage of the solution, which I claim is the best solution currently. I will conclude this article with some criticism. potential and responses thereto.

[2] What does the price of gasoline 0.15 LYD mean?

This price is equivalent to 11.4 cents when the value of the dinar was (0.5175 Special Drawing Rights). This corresponds to the exchange rate of the dollar being about 1.32 dinars. As in 2013 and the beginning of 2014, then the price of gasoline decreased slightly to equal 10.7 cents when the dollar reached approximately 1.40 dil. Despite the stability of the value of the dinar in the Special Drawing Rights unit and the price of gasoline is currently stable.

If this situation continued like this until now, perhaps we would be discussing today how and to what extent it is possible to increase the price of gasoline to become more than 11 cents, let it be, for example, 16 or even 20 cents, and that would not cost much trouble, as the price of 20 cents is equivalent to 0.28 LYD. If the price of the dollar is 1.40 D.L. It is equivalent to 0.26 LYD. If the price of the dollar is 1.30 D.L. In all cases, we remain close to the goal, which is reaching a balanced price for gasoline that responds to the needs of individuals and institutions without burdening them or responding to the desires of smugglers and greedy people. But this talk has become a dream and is no longer applicable, and there are two main reasons or factors for this:

(a) The oil closures that began in late 2013 and were repeated repeatedly, and this absurdity continues.

(b) The wars that began around the middle of 2014 and continued and spread, and although they stopped in 2020, there is no guarantee that they will not be repeated.

These two factors resulted in an unprecedented rise in inflation rates, reaching 26% in 2016 and 2017, the deterioration of the productive capacity of economic sectors, and the deterioration of foreign exchange reserves that supported the equivalent value of the Libyan dinar. Since 2014, the black market for foreign exchange has spread and the value of the dinar has weakened until it came. On 12/16/2020, it witnessed a tragic official reduction in the value of the dinar by 70%, so that its value became (0.1555 Special Drawing Rights Units) and the dollar exchange rate became equal to 4.48 D.L. Approximately, but now (01/13/2024), the exchange rate of the dollar at the Central Bank is (4.81 LYD), and thus the price of gasoline has decreased to be equivalent to 3.31 cents (0.15 ÷ 4.81 = 3.1).

The lesson learned from the aforementioned workers (A) and (B) is that they were, in addition to what was mentioned above, encouraging smugglers to increase their activity in smuggling fuel (and also non-fuel). Instead of the previous price of gasoline, which was 10.7 cents, it became only 3.1 cents. This places a huge burden on the state in facing this problem, as it is now unable to reach even the price of 10.7 cents that was available to it, so how can one think of a price higher than that? When decision makers took a decision to reduce the value of the dinar, they may not have thought that this conflicts with the principle of combating smuggling!!!

The conclusion from this clause is that it can be said that gasoline in Libya is now distributed for free and that the price paid is only a symbolic price that cannot be relied upon to cover a noteworthy percentage of the cost.

[3] Is Libya the only country in the world where the price of gasoline is 3.1 cents?

Libya is not the only country in the world whose people enjoy such a cheap price for fuel in general and gasoline in particular. Rather, it is the second cheapest country in the price of gasoline, as globally published data on gasoline prices at the beginning of this year 2024 indicates that Libya is in second place after Iran and before Venezuela. As follows (price in cents):

(1) Iran 2.9 (2) Libya 3.1 (3) Venezuela 3.5

On the other hand, we find that most countries exceed these symbolic prices many times over. For example, we find that the price of a liter of gasoline in cents in three neighboring countries is as follows:

(1) Algeria 34.2 (2) Egypt 40.3 (3) Tunisia 82.4

That is, the price of gasoline in Algeria, Egypt, and Tunisia is equivalent, respectively, to about 11, 13, and 27 times its price in Libya. The most expensive price of gasoline in the world is in Hong Kong, where it reached $3.1, equivalent to 100 times its price in Libya.

The bottom line is that the price of gasoline in most countries of the world, including neighboring countries, is many times its price in Libya, and despite our understanding of the situation of the Libyan economy and its lack of transportation alternatives, keeping the situation as it is cannot be justified in the interest of the Libyan economy, and from my point of view the waters must be moved. Stagnant, even a little, as will be discussed in this article.

[4] Smuggling problem

The problem that concerns Libya is the large differences in gasoline prices between it and neighboring countries in particular, as these large differences lead to an increase in the activity of gasoline smugglers, taking advantage of the large difference in price.

Although this smuggling phenomenon is not new and has been known for more than 30 years, it has certainly worsened in recent years after the devaluation of the Libyan dinar. Therefore, it is economically unacceptable to maintain the current situation as it is, and strict measures must be taken in order to protect the wealth and money of the Libyan people. We may need to implement a program in this regard in stages.

[5] A proposal to implement the first phase of the subsidy lifting program

The process of lifting support cannot be implemented with the stroke of a pen because of the serious consequences and consequences of economic, social and political dimensions. Rather, lifting support must be achieved according to a sincere and strong will and according to a timetable implemented in stages. Below I suggest that the implementation of the first phase of this program be as follows:

Firstly: Firmly confront the crime of smuggling gasoline, and indeed all goods, by using border guards, drones, and all means of surveillance and protection, while bringing the smugglers to justice. This point is very crucial and failure to do so is a failure of the entire program.

secondly: Raising the price of gasoline from 150 dirhams to 250 dirhams, which is equivalent to an increase (according to the current exchange rate) from 3.1 cents to 5.2 cents. Although this increase represents a rate of 67%, which seems high by economic standards, I adopt it in view of the above-mentioned rise in inflation rates and foreign exchange rates, and in view of the accompanying salary increases (although they did not include all segments of workers in the state). ). This is to gradually move the price of gasoline towards the equilibrium point. Although this partial movement towards the equilibrium point does not prevent smuggling because the price difference is still large, it is necessary to start with it while continuing firmly with the point (first), which is to monitor and protect the borders, arrest the tamperers, and bring them to justice.

Third: Giving an appropriate period to evaluate the impact of the proposed increase in (Second) on various economic variables, especially on cost and prices, and the extent of the ability of economic policies to absorb the bad effects of this increase, which effects, in my estimation, will be under control within the framework of rational economic policies. In parallel, economic policies must be targeted to encourage investment in transportation and the construction of roads, bridges, and railways throughout Libya to create transportation alternatives. In this context, I advise investing through what is known as the BOT system, which is a system that has proven successful in many developing countries. In conclusion, the success in increasing the gross domestic product, both oil and non-oil, the success in rationalizing public spending, the ability of the Central Bank to manage monetary policy well by controlling the money supply, and its ability to create a high degree of stability in the exchange rate away from reactive policies are all factors that lead to… To curb inflation and enhance the value of the Libyan dinar, and then curb gasoline smuggling without the need to significantly increase its price in Libyan dinars, as some speakers on social media might imagine.

Fourthly: I adopt the position that ((support is for the poor and no support for the rich)) so I propose that the state approve for the year 2024 an amount of 1000 D.L. (One thousand dinars) as a point on the poverty line for a family consisting of two people, 1,500 dinars. (One thousand five hundred dinars) for a family of three people, 2,000 LYD. For a family consisting of four people or more, the state guarantees the supplement of these amounts to those whose incomes were less than it according to a declaration signed by the beneficiaries and asking about any change in it that occurs in the future. This principle does not conflict, as some think, with the rights of citizenship because the citizen has the duty to finance the state’s general budget through his commitment to pay tax installments according to the bracket to which his income reaches. The first bracket above the poverty line must be exempt from tax, while the bracket that falls below The poverty line: the state pays it a subsidy, i.e. a negative tax. This is the accepted method in most countries, and Libya is no exception. It is a stable, cohesive and permanent system that is not tied to a specific period of time and ends, as those who say, imagine, in a method of “replacing support,” which is a method that is not based on any scientific basis.

[6] Possible criticisms and responses to them

A number of criticisms have been directed at this proposed program, some of which I implicitly responded to in the text. I will mention three other criticisms as follows:

1- Some may wonder why it was not proposed to increase the price of gasoline to 4.00 LYD. Or 3.50 D.L. To end the phenomenon of smuggling all at once. The response to this is that this is an act that cannot be adopted by any rational economic policy for the following reasons:

• We do not need such a large increase to prevent smuggling, because a price less than 3.00 DLD will prevent smuggling to both Tunisia and Chad because it is a price that makes smuggling useless from the smugglers’ point of view, and a price less than 60 DLD. It will prevent smuggling to both Egypt and Algeria for the same reason. Setting a price of 4.00 D.L. or 3.50 D.L. is an increase that is not justified from an economic standpoint because it ignores the cost incurred by the smuggler, which is not only the cost of transportation but also the cost of smuggling, including the risks he is likely to be exposed to in the face of border guards.
• Such a large increase may generate bad economic effects that are out of control, coming from those affected by such a large increase, and it may be difficult to find effective economic policies to absorb these effects. On the other hand, retreating from these large prices becomes a failure itself.
• In general, the economic principle of gradually bringing about economic changes is the correct principle and is the rational principle that rational economic policy must adopt in all fields.

2- Some may wonder about the second stage and the third stage, and when do we stop? The answer to this is that the second stage comes after the implementation and evaluation of the first stage, and the results are based on reality and not theoretical talk. As for when to stop, the answer is linked to the achievement, that is, to the successes in implementing each stage. Thus, we stop when the price of gasoline reaches its equilibrium level referred to in the text, and the equilibrium price does not necessarily have to be the high price that some people fear, such as 4.00 LYD. Or up to 3.00 D.L. In fact, it may be much less than that if successes are achieved in controlling inflation and enhancing the value of the dinar, that is, if it is possible to implement the opposite of what happened during the years 2014-2020. Although I am convinced that this is difficult, Libya’s resources, if used well, are capable of achieving what we do not expect.

3- Some may see that this program is inappropriate for the current fragile political situation in Libya, as from a political standpoint it is difficult to agree on making such decisions. Despite the validity of this criticism, especially in view of what we see of political wrangling and reactions that are not based on the interest of the nation, which may lead to the emergence of some positions that undermine any economic reform program, I hope that the loyal people of the nation will not stand by and watch the theft and plunder of wealth and money. Their country, and I hope that every official will exert his effort within the scope of his administrative powers in order to move the stagnant water by saying the word “no” to stealing gasoline, “no” to stealing oil wealth, and “no” to plundering state funds, so that they will be recorded in history with a golden ink.

The opinions, facts and content presented here reflect the author only. Ain Libya does not bear any responsibility.