Libya's Dbeibah pushes to lift petrol subsidies despite protests

Decision is expected to anger public as at least two oilfields had their operations halted due to demonstrations

Abdul Hamid Dbeibah, prime minister of one of Libya's two rival governments, said petrol subsidies are taking a toll on public finances. Reuters

Libya's Tripoli-based government plans to remove petrol subsidies, Prime Minister Abdul Hamid Dbeibah has said.

The move is aimed at countering smuggling and its increasing impact on the state’s budget which is already witnessing a major deficit, Mr Dbeibah said during a meeting with the country's hydrocarbons committee.

He indicated that state petrol subsidies currently stand at 50 per cent, and are taking a toll on the nation's finances and exhausting its resources.

The decision, which will drive up the price of petrol for ordinary Libyans, comes with substantial risks given the tense situation in the divided country and protests at several oilfields and refinery plants.

Libya remains divided between the Tripoli-based Government of National Unity and the Government of National Stability based in the east of the country, after years of civil war.

Unemployment in 2022 was about 20 per cent, according to a World Bank study, in a country that relies heavily on its oil industry, which has been hit by protests.

In Libya, a litre of both crude oil and diesel costs $0.03, the second cheapest in the world, according to the Global Petrol Prices online tracker.

However, cutting subsidies will heavily affect Libyans' petrol purchasing power, as the average public sector salary is $240, according to salary tracker Bdex. The public sector accounts for 85 per cent of employment in Libya, reported the World Bank.

Last week, the Sharara oilfield was forced to completely shut down due protests by local residents. The oilfield has a production capacity of up to 300,000 barrels per day.

Protesters called for more developmental projects in their region, namely in infrastructure and the health sector, in addition to demanding more jobs for unemployed youth.

In response to the widespread anger regarding his decision, Mr Dbeibah repeated that the intention of his decision was to ensure subsidies benefit citizens, instead of smuggling networks.

“The financial return [of subsidies] must be directly in the citizen’s pocket, without any intermediary,” Mr Dbeibah said in a Facebook post on Thursday night.

He also sought to reassure citizens that his decision would only be fully enforced once accepted by Libyans and the right formula for the introduction of these subsidies cuts is reached.

According to a recent study, Libya loses at least $750 million annually as a result of petrol smuggling.

Subsidies allocated for the sector have exceeded $12 billion in 2022, compared with $7 billion in 2021.

These factors have caused Libya to increase its imports of petrol by 19 per cent to maintain the stability of the domestic market.

Mr Dbeibah also said smuggling to neighbouring countries had led to fuel shortages in Libya's border regions.

Corruption accusations

The Benghazi-based administration criticised the decision by Mr Dbeibah's UN-backed government.

Rival Prime Minister Osama Hamad said on Thursday that the decision was hasty and did not take into consideration the needs of Libyan society.

“Such decisions [lifting subsidies] cannot be taken by any party in such a hasty manner and without the conducting the necessary studying of their consequences, dimensions and damages,” Mr Hamad said.

Mr Hamad also accused Mr Dbeibah of wasting hundreds of billions of dollars through his previous policies in the petroleum sector, which were aimed at making the North African country less dependent on imports.

“We affirm to Libyans that the purpose of this decision is to seize the funds allocated for petrol subsidies, and they will be incapable of fulfilling promises to provide compensation and alternatives,” Mr Hamad said.

“It [the Tripoli government] did not establish a refinery, nor did it renew or develop the existing ones.”

Petroleum products drive the Libyan economy, comprising about 96 per cent of its exports and up to about 98 per cent of the state treasury revenue.