MONGABAY.COM
Mongabay.com seeks to raise interest in and appreciation of wild lands and wildlife, while examining the impact of emerging trends in climate, technology, economics, and finance on conservation and development (more)
WEEKLY NEWSLETTER
|
|
Libya
Index
The first budget surplus in Libya's history occurred in 1966
when oil revenues began to increase spectacularly. Budget
methodology and fiscal policy under the monarchy in the 1960s had
tended to follow a 1959
World Bank (see Glossary)
mission's
recommendations, as modified by the progressive influence of rising
nationalism and the unforeseen growth of the petroleum industry.
Increased integration of the provincial fiscal administrations with
the central administration was effectively achieved by the
conversion of the monarchy from a federal to a unitary form of
government in 1963. The assurance of large future oil revenues
enabled the government to introduce, also in 1963, a sizable
development plan and a corresponding administrative apparatus. The
plan legislation included a provision that not less than 70 percent
of all future petroleum revenues should be allocated to the
financing of development.
During the monarchy, the government's budget was organized by
the Ministry of Finance, discussed and sanctioned by the
parliament, and signed into law by the king. It consisted of a
current expenses budget and (after 1962) a development expenditures
budget. After the June 1967 War, a supplement was added to finance
enlarged national defense outlays and annual subsidies to Egypt,
Jordan, and Syria.
Under the revolutionary government, the budget was divided into
an annual administrative expenses budget, an annual development
expenditures budget, and a special expenditures budget. Beginning
in 1982, the government also listed certain key imports under a new
commodity budget. Until 1974 the fiscal year
(FY--see Glossary) had
begun in April, but since January 1974 the fiscal year has been
concurrent with the Gregorian calendar year. New procedures for
developing the budget were initiated in FY 1978. Initial proposals
for the administrative budget started at the municipal level; the
proposals were forwarded to an appropriate secretariat for
consolidation and subsequent submission to the Secretariat of the
Treasury, which reviewed and forwarded the proposals to the General
People's Congress
(GPC--see Glossary)
for final approval. The
development budget was prepared initially by the organizations that
would implement the specific project; the proposals were then sent
to the Secretariat of Planning for revisions and submission to the
GPC. The special expenditures and commodity budgets have not been
in the formal budget, but they have been approved during the fiscal
year by the GPC.
Special expenditures usually have included grants, loans,
subsidies, and the purchase of equipment for national defense. The
total generally has not been made available to the public because
of the defense-related expenditures, but some partial expenditures
for special items have been released on occasion. As much as 80
percent of the administrative budget has been spent by the central
government--the rest being divided between the municipalities and
public enterprises in years when they ran at a net loss. In the
mid-1980s, however, municipal allocations were increasing at the
expense of central governmental expenditures. In 1983 and 1984,
central allocations under the administrative budget were just under
50 percent of the total, whereas the municipalities spent just over
50 percent. By 1985 the municipal share of the total administrative
budget allocations had risen to 71.5 percent, whereas the central
government took only the remaining 28.5 percent.
Before the 1969 revolution, the government spent more funds on
the administrative budget than on investments. Since 1969, however,
development expenditures have been much higher than administrative
expenditures because of the government's policy of using oil
revenues to build for the future. The development budget generally
has covered economic and social projects, but it also has included
working capital for public sector corporations and some lending and
operating expenditures. The annual development budget has usually
corresponded to a certain percentage of the total amount projected
to be spent by the current development plan. All budgets have been
amended frequently during the course of any year; the amendments
generally reflect increases for specific projects or purposes or
cover the increased costs of imported items for development
projects.
Planned expenditures under both the administrative and
development budgets increased rapidly during the 1970s. By FY 1980,
the administrative budget had increased by almost five times its
level in FY 1974, moving from LD192.9 million to LD950 million. The
development budget, over the same time period, increased its
planned expenditures by slightly less than a factor of four, from
LD740 million to LD2.53 billion. During the 1980s, growth leveled
off. The administrative budget increased by only 14 percent between
FY 1981 and FY 1984, and allocations to the development budget,
which has always been the largest component of total government
spending, actually decreased almost 30 percent. Data available for
the commodity budget indicate that LD1.56 billion and LD1.67
billion were spent in FY 1983 and FY 1984, respectively.
By far the largest item in the FY 1984 administrative budget
was for defense spending, which accounted for 24 percent of the
total
(see Defense Costs
, ch. 5). The next largest item was for
education at only 6 percent of the total budget. Under the
development budget, the biggest items traditionally have been
agriculture, heavy industry, oil and gas extraction, and
communications and shipping. The relative levels of expenditures
among these four items usually depended on the guiding philosophy
behind the particular development plan in force when actual budget
allocations were made. Thus, in FY 1974 and 1975, heavy industry
and oil extraction received the most funding. From 1976 through
1979, the largest percentages went to agriculture, including
irrigation. During the 1980s, heavy industry and, to an increasing
extent since 1982, communications and shipping occupied the leading
positions in the development budget. Since 1983 the commodity
budget has mainly been used to subsidize imports of basic foods,
raw materials and parts for light industries, and key engineering
projects, principally the GMMR
(see Land Use and Irrigation
, this
ch.).
The government funded these budgets in a simple, if unusual,
manner. All nonpetroleum revenues were assigned to cover
administrative budget expenditures. Any gap between revenues and
expenditures was met by transferring some of the petroleum revenue,
a practice that ensured that the administrative budget was always
in balance. In FY 1984, for example, 20 percent of the
administrative budget was covered by oil revenues. After the
administrative budget had been balanced, the remaining oil revenue
was used to fund the development budget. In practice, this system
meant that, while allocations under the adminstrative budget were
almost always assured of being funded, expenditures under the
development budget could diverge greatly from planned levels
depending upon variations in oil revenues.
Although actual development budget expenditure data--as opposed
to allocation data--are hard to come by, Central Bank figures for
1981 and 1982 indicated that the difference between planned and
actual expenditures under the development budget could be quite
large. For instance, in FY 1981 actual expenditures reached 96
percent of the planned levels, but in FY 1982 they only accounted
for 62 percent of the official target. Thus, allocation figures for
the development budget must be viewed with skepticism and, despite
their impressive theoretical allocations, various development
projects were often held up for lack of funds.
The petroleum industry, through payments of taxes, royalties,
profits, and fees, has accounted for as much as 80 percent of the
government's revenues. The NOC has also paid royalties and taxes,
and since 1974 its contributions have assumed greater importance as
its production and exports have increased
(see Hydrocarbons and Mining
, this ch.). Royalties paid by the oil companies have been
based on volume of production and a posted price. Taxes have been
based on a theoretical profit determined by multiplying the export
volume by the posted price and subtracting royalty payments and
operating costs. The royalty and tax rates have periodically been
revised upward or downward depending upon the world market. By law,
15 percent of the oil revenues must be set aside as reserves.
Nonpetroleum revenues have consisted of profits from other
government enterprises, import duties, income taxes, and
miscellaneous taxes and fees. In addition to the regular customs
duties, two 5-percent taxes have been levied on all imports, the
funds being earmarked specifically for municipalities and for
charities. Direct taxes--mostly income taxes--have brought in only
about 5 percent of total revenue. All income was taxed, the rate
depending on the source. In the late 1970s, there were separate
taxes for income from rental property, agricultural activities,
commerce, industry, and trades. There was also a professional
income tax (the first year's earnings of a career were tax exempt),
a personal income tax, and a general income tax, which was levied
on all persons and companies and included all income--even that
subject to one of the special income taxes. The general income tax
was very progressive and was designed to prevent capital
accumulation. The tax brackets in effect in late 1976, for example,
worked out so that a taxpayer with total income of LD192,000 would
retain only LD72,000 and only 10 percent of all additional income
over the LD192,000 level. In 1987 Libya's tax structure continued
to be based on laws dating from the 1970s or before.
The administration of the tax structure was altered with the
introduction of the Administrative Contracts Regulations in 1980
and Law No. 5 of 1981, which provided for some tax exemption for
foreign companies. Until 1981, all private companies were subject
to a company tax, with petroleum companies subject to a special
petroleum tax on their profits. Although in the past Libya had not
appeared to encourage new foreign investment, a number of
incentives in the form of tax exemptions were built into the 1981
law to encourage such investments.
Data as of 1987
|
|