KEY POINTS
- Libya’s eastern government plans to end fuel subsidies to curb smuggling.
- Fuel smuggling costs the country $5 billion annually, the World Bank reports.
- Subsidies cost 12.8 billion dinars this year, adding to economic strain.
Libya’s eastern-based government, led by Prime Minister Osama Hamad, has announced its agreement to phase out fuel subsidies, marking a significant policy shift for the war-torn country.
The decision, reached during a meeting in Benghazi with officials from the Central Bank of Libya (CBL), aims to curb widespread fuel smuggling and redirect financial resources.
Despite the agreement, many questions linger over the feasibility of implementing this proposal in a politically divided Libya.
Hamad’s administration operates in opposition to the internationally recognized government in Tripoli, which has yet to make substantial moves on the same issue.
Smuggling networks thrive on cheap fuel prices
Fuel subsidies in Libya have long made gasoline among the cheapest in the world, priced at just 0.150 Libyan dinars ($0.03) per liter.
This has fueled lucrative smuggling operations estimated to be worth at least $5 billion annually, according to the World Bank.
Since Libya’s split into rival administrations in 2014, these smuggling networks have flourished, exploiting the country’s subsidized fuel prices and fragile political infrastructure.
According to Reuters, the eastern government hopes that removing subsidies will help address the issue, but its success largely depends on nationwide cooperation and enforcement.
Costs of subsidies and hurdles to reform
The Tripoli-based Central Bank of Libya revealed that fuel subsidies have cost the country 12.8 billion Libyan dinars from January to November this year.
While Hamad’s administration is pushing forward, Tripoli’s Prime Minister Abdulhamid Dbeibah had earlier proposed removing subsidies through a public survey but has not acted further.
Experts suggest that eliminating subsidies could help reduce wasteful spending and combat corruption, but such reforms often face resistance due to potential public backlash.
The country’s ongoing political divide adds another complexity to achieving this goal.
