Economic Subsidy Policy Between the Pros and Cons of Assistance

Abstract

This study aims to identify the subsidy policies implemented in Libya, focusing on their advantages and disadvantages, and exploring the possibility of mitigating their negative impacts. Particular attention is given to the phenomenon of corruption directly linked to "in-kind subsidy" policies. This paper utilizes a simple mathematical model to demonstrate the correlation between corruption and in-kind subsidies, and the resulting waste of financial resources. By analyzing the actual consumption values of fuel from 2016 to 2024, based on Central Bank of Libya publications, the study focuses on gasoline and diesel fuel as a case study. These commodities were selected due to their significant and direct impact on the general economy and the final consumer, especially regarding the potential removal of subsidies and its subsequent positive and negative effects detailed herein. This paper serves as a primary reference for decision-making regarding the continuation of in-kind subsidies or their replacement with direct "cash subsidies," which are characterized by reaching eligible beneficiaries directly while securing substantial financial resources for various national economic needs. The researcher observed a continuous annual increase in consumption values, raising significant questions about large-scale waste and corruption. Consequently, the study establishes that as the gap between the subsidized price and the market price widens, the phenomenon of corruption emerges and flourishes, concluding that corruption is both significantly and directly influenced by, and an influencer of, the in-kind subsidy system.