The Importance of Fiscal Policy and Its Impacts on Economic Components in Libya

Abstract

The Impact of Fiscal Policy on Economic Components in Libya [2000–2023] Abstract: This study aimed to identify the impact of fiscal policy on various economic components in Libya during the period [2000–2023]. It addressed several key questions: What is the concept and evolution of fiscal policy? What are its objectives, tools, and significance in Libya? What are the most prominent challenges facing fiscal policy within the Libyan economy? Additionally, the study sought to identify economic proposals and reforms related to the future of fiscal policy in Libya. The research employed a descriptive-analytical approach, focusing on studying and describing relevant variables, alongside utilizing statistical methods to analyze data extracted from financial reports. To achieve the study’s objectives, E-Views software was used for data processing and hypothesis testing. This involved applying various statistical indicators, including: Descriptive Statistics [arithmetic means, standard deviations, maximum and minimum values, and growth rates]; Simple Linear Regression to test the impact of the independent variable on dependent variables; and econometric tests such as the Augmented Dickey-Fuller [ADF] test, Granger Causality, and Cointegration to determine the relationships between variables. Key Findings: There is no statistically significant impact of total government spending in Libya on the GDP growth rate during the study period. There is no statistically significant impact of total government spending in Libya on the unemployment rate during the period [2000–2023]. There is a statistically significant impact of total government spending on the inflation rate; the results indicate that a 1% increase in government spending leads to a 0.282% inc rease in the inflation rate. Recommendations: The study recommends: Reducing government spending on luxury goods and curbing waste in government sectors. Implementing comprehensive economic reforms focused on private sector development and enhancing non-oil revenues. Establishing a unified budget that defines spending priorities and enhances the credibility of public finances. Strengthening financial governance through clear policies, anti-corruption measures, and increased transparency in foreign exchange management.