The Cost of Fuel Subsidies and Their Impact on the General Budget in Libya

Abstract

This study addressed the fuel subsidy program and its impact on the general budget of the Libyan state through a standard study covering the period (2006-2024). Data were collected from annual reports issued by state institutions, namely the Audit Bureau, the Ministry of Planning, the Ministry of Finance, and the Economic Bulletin of the Central Bank of Libya. Based on the descriptive analytical approach and the standard quantitative approach, unit root tests, Augmented Dickey-Fuller Test (ADF) and Philips-Perron (PP) were conducted to determine the degree of stability of the time series of the study variables, where the independent variable represents the size of the support allocated by the state to fuel Subsidies (FS), while the dependent variable represents the general budget balance (GBB). The results of the two tests showed that the two series were stable at the level, i.e. they are integrated from degree zero I (0). Accordingly, the simple linear regression methodology and the Granger causality test were applied to determine the direction of the relationship and the degree of influence of both variables. The study concluded that the value allocated to fuel subsidies had a negative impact on the general budget, which affects the state's ability to allocate available resources to development priorities. Thus, working on reforming the fuel subsidy program would enhance the efficiency of the economy and improve the general budget position.