The Dynamics of the Relationship Between Subsidy Rationalization and Food Security in Libya: An Econometric Analysis from an Economic-Accounting Perspective (1970–2024)

Abstract

This study aims to examine the dynamic relationship between government subsidy rationalization and food security in Libya over the period 1970–2024, within an integrated framework combining economic and accounting perspectives. It addresses a key research gap related to the limited empirical evidence linking subsidy policies to food security outcomes in the Libyan context, particularly under global food price volatility and economic instability. The study employs the Johansen cointegration approach and the Vector Error Correction Model (VECM), following unit root tests (ADF and Phillips–Perron), which confirm that all variables are integrated of order one I (1). The findings reveal the existence of a long-run equilibrium relationship, where subsidy rationalization has a significant positive impact on food security, while global food prices and inflation exert negative effects. The error correction term indicates a slow adjustment speed of approximately 8.7% annually, reflecting weak responsiveness to short-term shocks. From an accounting perspective, the relationship is interpreted through a national food balance framework linking resources and uses, enhancing the understanding of public expenditure efficiency. The study recommends restructuring the subsidy system by adopting a hybrid approach combining targeted cash transfers and smart in-kind subsidies, alongside strengthening accounting oversight and establishing strategic reserves to mitigate global price shocks and ensure sustainable food security in Libya.