As the conflict and violence in Libya persists, the situation on the ground is deteriorating. Libyan citizens continue to struggle with price increases for basic commodities, while at the same time many experience delays in state salary payments.
“Six months ago you could buy 15 bread rolls for 1 Libyan dinar, now all you get is 7 or 8,” explains Monsour, a government employee in Tripoli. He is worried about inflation and how it has affected food prices, as well as the charges for medicine; there has been a 100 per cent increase in the price of, for example, basic products such as paracetamol and cough medicine for children. “And babies’ nappies,” he adds. Even the insulin injections for diabetics have gone from being free to cost about 20 dinars. For Monsour and his family, commodities such as snacks and soft drinks have become luxury items, a result of an import ban by the Tripoli authorities earlier this year which also covers sanitary products, pasta and olive oil in an attempt to save hard currency.
Due to the foreign currency shortage, while the official exchange rate is 1.40 Libyan dinars to $1, the rate for many Libyans on the parallel market is around 4 dinars. Libya’s black market is not new, however; since the revolution which ousted Muammar Gaddafi the difference in rates has been booming. The exchange rate also differs within the country, where it is higher in Tripoli than in Tobruk.
At the same time state employees complain about delayed and unpaid salaries. Monsour explains that he is lucky to have received his salary, but there have been times when he hasn’t been able to withdraw money from his account due to the lack of hard currency. For Libya’s half a million teachers the situation has been worse; Tripoli recently saw schools closing down due to strikes after teachers suffered with two months’ salaries unpaid. It is not just teachers who have been affected; all state employees, such as cleaners and airport staff, face similar issues. As of today, there is no labour union in Libya to represent the employees’ demands in a formal way. In addition, since the revolution salaries have risen significantly, by up to 300 per cent. “However, politicians in the country did not curb the inflated figures as it serves them well in terms of public popularity,” argued Libyan economist Amr Omran Farkash. He estimates that, unless the situation changes, Libya is prone to see more of these strikes in the coming period.
Meanwhile, the General National Congress, the Tripoli-based government, suggested recently to double state salaries, despite the fact that the Audit Bureau alerted ministers that more than twice the national income is already being spent on salaries and subsidies for basic food commodities and fuel, which alone amount to about one third of the government’s public spending. According to the congress, the increase would benefit 95 per cent of state employees and narrow the gap between the highest and lowest paid. However, warned the Audit Bureau, 33 billion dinars would this year be allocated on state wages and subsidies, while the income is estimated at 15 billion, suggesting that at this rate it will take Libya just two or three years to finish its reserves and go bankrupt.
The non-payment of salaries is mainly due to Libya’s strained public finances that are struggling after the loss of oil revenue. “The current oil sales do not cover even half of the salaries,” explains Libyan political commentator Mohamed Eljarh. The result has been a delay in public salaries and cuts in subsidies. Libya, which holds the largest crude oil reserves in Africa, is dependent on its oil revenue. Oil and gas production has amounted to about 65 per cent of Libya’s GDP, 98 per cent of government revenues and 96 per cent of exports. However, due to the conflict, oil production has gone from 1.5 million barrels of crude oil per day to about 300,000. Adding to that difficulty is the fall in oil prices. “Practically, it means that Libya needs to double or even triple its pre-revolution export levels to compensate for the international oil price fall,” explains Farkash. The export levels plus the shortfall in prices mean that the state budget will suffer from a deficit for the near and medium term future. Together with the Libyan Central Bank, the National Oil Corporation makes up the key pillars of the Libyan economy. Reports suggest, though, that the National Oil Corporation in Tobruk is attempting to sell oil independently which, according to Eljarh, could divide the country even further. “If they manage then there is no longer a united institution,” he says.
“Libya is on the verge of economic and financial collapse,” said the former UN Special Envoy Bernadino Leon in April when talking about the country’s economic situation. The UN estimates that 2.4 million Libyans are in need of humanitarian assistance and about 1.3 million are at risk of being food insecure. “The situation is only going to get worse,” predicted Eljarh. At these desperate times there are also those who argue that Libya should sell its gold reserves in Bayda. “Without calculating what the long-term consequences of such decisions may be,” he argues.
In an attempt to improve the situation, the Central Bank has imposed restrictions on cash withdrawals from local banks. According to Farkash, the priority should be to use national ID numbers to make salary payments, as there have been cases of duplicate cash transfers. The Central Bank also has to fight the black market and the gap between the currency rates, and there needs to be attempts to control corruption and enhance mechanisms for accountability and transparency, he concluded.
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.