In an effort to boost Libya's private sector and ease budget pressures, Libyan authorities recently revealed plans to lay off more than one-third of its public-sector workforce.
Some 400,000 civil servants and state employees will lose their jobs, announced Lybian Prime Minister al-Baghdadi Ali Al-Mahmoudi according to the AP.
Mahmoudi made the announcement before parliament, to whom he explained that the public sector workforce, made of more than one million people, with total salaries of some 4 billion dinars ($3.13 billion) in 2006.
The prime minister added that those laid off as part of the plan would be compensated, and that the objective of the proposal was to improve the lives of Libyans, including services such as health and education. He also stated that he wanted to encourage the private sector to make manufactured goods of sufficient quality to compete with imports.
"Each released public employee will be given his full salary for three years or will be granted up to 50,000 dinars in loans for each one who wants to start his own business," stated Mahmoudi.
"The objectives of this budget are to increase Libyans' standard of living by the rate of 5 per cent during this year and to promote productive activities," Mahmoudi added as he outlined a 31 billion dinar draft budget for 2007.
Libya, an OPEC member-nation with a population is primarily dependent on oil-revenues for nearly all of its hard-currency earnings, as oil comprises some 95 percent of export earnings, one-quarter of the nation's GDP, and 60 percent of public sector wages.
Libyan leader Muammar Gaddafi has pushed for greater self-reliance for Libya's economy, and has criticized such over-reliance on many occasions along with Libyan dependence on foreigners and imports of consumer goods. He has also suggested private sector-friendly reforms to fight an unemployment rate of at least 13 percent.
In addition to the nation's over-reliance on oil, Libya's economy has also been weakened severely by international sanctions, outdated centralized management and primitive banking sector, as well as problems of corruption and bureaucratic red tape.
Over the past several years, Libyan authorities have made progress on economic reforms and attempts to reintegrate into the international community. While UN sanctions were lifted in 2003 and most US sanctions one year later, the restoration of diplomatic relations in 2006 when Libya abandoned its weapons of mass destruction program led to even greater prospects for development. As a result, Libya has been able to attract more foreign direct investment, albeit primarily in the energy sector.
This week's move to scale down the public sector is part of the larger reform campaign to move towards a more market-based economy by liberalizing its socialist-oriented one. Libya has applied for WTO membership, reduced many subsidies, and announced plans for privatization.
© 2007 Al Bawaba (www.albawaba.com )