The Role of Fiscal Policy in Stimulating Economic Growth in Libya During the Period 2014–2024

Abstract

The study demonstrates that the Libyan economy has undergone a critical phase marked by oil price volatility and political as well as institutional instability, which rendered its near-total dependence on oil revenues a primary source of fiscal fragility. Within this context, fiscal policy emerged as a dual-function instrument: expansionary through increased public spending to counter recession, and contractionary through expenditure control and taxation to curb inflation. Nevertheless, oil revenues remained the dominant resource, while non-oil revenues did not reach levels sufficient to ensure sustainability. The study is grounded in the hypothesis that prudent management of fiscal policy tools—such as public expenditure, taxation, and deficit control—can stimulate economic growth despite structural constraints. The findings emphasize that fiscal reform requires restructuring public expenditure, combating corruption, and strengthening coordination between fiscal and monetary policies, alongside diversifying income sources. In this regard, the study affirms that achieving economic stability and sustainable growth in Libya depends on the state’s ability to overcome its unilateral reliance on oil and to build a more resilient and diversified fiscal base.