## The Day After Tomorrow: Designing an Optimal Fiscal Strategy for Libya

_IMF Working Papers, March 27, 2013_

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## Bibliographic details
- Authors: Carlos Caceres, Serhan Cevik, Marco Committeri, Borja Gracia
- Published: March 27, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484389812.001

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### Summary
- Libya is highly dependent on exhaustible and volatile hydrocarbon resources, which constitute the bulk of government revenues.
- Resource wealth provides the means to promote socio-economic development, but procyclical fiscal policies threaten macroeconomic stability, fiscal sustainability, and intergenerational equity.
- The paper is organized in three parts:
  - assessment of the cyclically adjusted fiscal stance;
  - analysis of fiscal sustainability according to the permanent income framework;
  - simulations of various fiscal policy rules to develop a rule-based fiscal strategy that would delink the economy from oil price fluctuations, improve management of resource wealth, and safeguard macroeconomic stability.

### Key assessments and findings
- Fiscal dependence: Hydrocarbon resources are the primary source of government revenues in Libya.
- Risks of current policy stance:
  - Procyclical fiscal policies undermine macroeconomic stability.
  - Procyclical policies threaten fiscal sustainability.
  - Procyclical policies impair intergenerational equity.
- Analytical frameworks used:
  - Cyclically adjusted fiscal stance analysis.
  - Permanent income framework for fiscal sustainability.

### Simulations and policy strategy objectives
- Simulated fiscal policy rules aim to:
  - Delink the economy from oil price fluctuations.
  - Improve the management of resource wealth.
  - Safeguard macroeconomic stability.
- Policy levers and concepts emphasized:
  - Fiscal rules and fiscal policy rules.
  - Expenditure rule as a potential instrument.
  - Cyclical adjustment of budget balances.
  - Management of financial assets derived from hydrocarbon revenue.

### Subjects and keywords (as provided)
- Subject: Expenditure, Fiscal policy, Fiscal rules, Fiscal stance, Fiscal sustainability
- Keywords: budget deficit, cyclical adjustment, exchange rate, expenditure rule, financial asset, Fiscal policy, fiscal policy rule, fiscal rules, Fiscal stance, fiscal sustainability, Global, government spending, hydrocarbon revenue, natural resource, natural resources, permanent income hypothesis, potential GDP, public financial management, WP

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## Content in this bundle

- **1. Sustainable Overall Public Expenditure Envelop Scenarios**
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  - [1. Sustainable Overall Public Expenditure Envelop Scenarios (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2013/_wp1379.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-day-after-tomorrow-designing-an-optimal-fiscal-strategy-for-libya-40431_