Reda Abdel Salam, an administrative official and the breadwinner of a five-member family, may soon have an easier time supporting his family now that the General National Congress (GNC) in Tripoli decided last week to lift government food subsidies in exchange for 50 Libyan Dinars (US $36.50) paid every month to each family member. Petrol prices will be fixed at 450 Dirhams (US $0.73) a liter, which is double the previous price.

Subsidies have already stopped

Reda Abdel Salam, an administrative official and the breadwinner of a five-member family, may soon have an easier time supporting his family now that the General National Congress (GNC) in Tripoli decided last week to lift government food subsidies in exchange for 50 Libyan Dinars (US $36.50) paid every month to each family member. Petrol prices will be fixed at 450 Dirhams (US $0.73) a liter, which is double the previous price.

Subsidies have already stopped

Abdel Salam will receive an additional LYD 250 (US $183) to his salary. “Food subsidies were suspended a while back, but what is new about this is getting a cash reimbursement,” he said, referring to the disappearance of rationed items from co-ops about a year ago.

Abdel Salam hopes this additional amount will help him avoid buying necessary items on credit, something he used to do through an agreement with a mini market owned by his friend; Abdel Salam paid back his debts after chasing down his salary, which was always late.

What if the cash suddenly stops?

Libyans dependent on social security or other subsidies dsitributed by the Development Fund for Limited-income Families have basically been left either unpaid or paid inrequently.

Najia Bashir who supports six children of different and relies on welfare, which is hardly sufficient to cover her children’s needs, says she gets all of her food at co-ops, but she is forced to shop around for reasonable prices.

Bajir fears that the money could stop suddenly, leaving her in an awkward situation. A 25-kg bag of rice costs 60 (US $44) Dinars and the prices of flour, cooking oil and tomato paste are on the rise.

She is also facing the transportation problem posed as a result of the rising prices of petrol and diesel. She has to pay more than 20 Dinars (US$ 14.6) every day to take her children to their schools and colleges.

Search for a job

The feeling of uncertainty has become a widely spread phenomenon in the Libyan street due to the Central Bank of Libya comments about belt tightening measures in the face of limited state resources generated by oil exports. The oil situation caused a budget deficit this year estimated by financial analysts at LYD 18 billion (US $13 billion) of the approved general budget of LYD 43 billion (US $31 billion).

Fifty-three-year-old Mohammed Farjani depended in the past years on the 500 Dinars (US $365) salary he received from the Economic Development Fund for Investment Portfolios originating from entrepreneurial businesses. These salaries have been stalled for more than a year without warning. Lifting the subsidies on foodstuffs and fuel will make it very difficult for Farjani to meet his family’s needs.

“Since the halt of the portfolio salaries, we have been depending on the 200 Dinars (US $146) stipend paid to my daughter Hanan who studies law at the University of Tripoli. Since then, I have been looking for a job to spare my daughter this ordeal,” he said. “In view of the fact that job opportunities are very scarce in Libya, lifting subsides will further aggravate the economic situation for limited-income people or those without income, people like me.”

Substitute first

While the irregular payment of salaries in all sectors continues with the approach of the holy month of Ramadan in which families’ consumption of food supplies increases, the salvation government, west of the country, is adamantly intent on going on with its subsidy lifting plan.

Mohammed Muazib, member of the GNC Planning Commission in Tripoli, said petrol and diesel price rises and lifting of subsidies for commodities and medicines will be partially carried out after allocating the funds earmarked for changing the subsidies into cash payments.

He added that the Congress is bent on implementing the decision as soon as possible. “Citizens will receive their allocated money for one or two months in advance prior to activating the subsidy lifting procedure to avoid price rises.”

Optimal solution

Jamal Shaibani, head of the price-budget fund, the authority responsible for the import of subsidized goods, believes that notwithstanding the existing fears, this decision is still considered an optimal solution to eliminate smuggling. He added that the decision would serve the best interests of all citizens, especially the poor.

“The increase that affects commodities will go to citizens’ pockets,” said Shaibani. “Those who try to question the viability of the money replacement plan are the only beneficiaries of the continued subsidies.”

Shaibani also emphasized that the main problem lies with the Central Bank of Libya. He expressed fears that the decision could be passed without the bank’s approval to continue paying the promised cash support which gives rise to many problems.

Shaibani affirmed that the reason for this decision lies in Libya’s worsening financial situation and the country’s exceptional circumstances which call for pursuing a policy that depends on squeezing and reducing expenditures. He stated that the value of commodities in the past reached up to LYD 14 billion a year (US $10 billion).

Food and fuel only

The GNC’s Deputy Head of the Finance Committee, Saad Bu Charadah explained that the subsidy will continue for medicines, water, public sanitation companies and household electricity supplies. He added that lifting subsidies will only apply to commodities, petrol and diesel for non-public power plants.

The value of cash support due to be added to the salaries, according to Bu Charadah, was calculated on the basis of the support value for fuel and flour, worth about LYD 4.5 billion($ USD 3,2 billion). The amount will be equally distributed to a million inhabitants with a share of 50 Dinars per capita. He said the money will be paid to the citizens for a period of two months prior to the implementation of the subsidies lifting decision in order to control prices.