The Impact of Fiscal Policy on Domestic Investment in Libya (2014-2024)

Abstract

This study aims to analyze the role of fiscal policy in activating domestic investment in Libya during the period (2014–2024). The study sought to highlight the effectiveness of Libyan fiscal policy in achieving economic development by analyzing the evolution of the monetary base, credit facilities granted by commercial banks, and the essential components of the monetary survey, and their relationship to the level of domestic investment, relying on official data issued by the Central Bank and the Ministry of Finance. The researcher adopted the descriptive analytical method to study the general trends of fiscal policy, in addition to analyzing the digital data of the monetary base and credit facilities to estimate the impact of fiscal policies on the volume of local liquidity and investment activity across various economic sectors. The results showed that the significant expansion of the monetary base during the 2014–2024 period did not translate proportionally into financing productive activity. Instead, Islamic Murabaha loans and ready money (M1) recorded significant increases, indicating a tendency for liquidity towards consumer financing rather than productive financing. The analysis of credit facilities also revealed that loans directed toward productive economic activities did not increase at the same pace as the rise in total facilities, reflecting the limited contribution of fiscal policy to effectively stimulating local investment. The study concluded that fiscal policy in Libya could be an effective tool for activating domestic investment if it is balanced between oil revenues, public spending, and bank financing for productive activity, with the necessity of diversifying revenue sources, enhancing the banking sector's capacity for productive financing, and achieving political and monetary stability that supports the local investment environment.