Rising Food Commodity Prices and Their Impact on Inflation in Libya

Abstract

This study examines the reasons behind the rise in food commodity prices over the past decade. The importance of the study stems from the fact that the effects of inflation have affected all segments of society, particularly vulnerable groups and low-income earners. The study aims to identify the main factors causing food price inflation, in addition to proposing some solutions to address it. A descriptive analytical approach was used to determine the key factors influencing food commodity prices.

As a result of instability and the lack of clarity in the economic outlook in Libya, fictitious companies emerged to import food commodities and monopolized letters of credit in foreign currency. Their primary objective was not the importation of foodstuffs but rather trading in foreign currency within the parallel market and expanding the shadow economy, while importing only small quantities of goods that were sold in the market at inflated prices. In addition, hasty and weak economic policies adopted by the government opened the market to speculators. Moreover, the global economy was significantly affected by the COVID-19 pandemic, which led to a doubling of global shipping costs, directly contributing to higher commodity prices in Libya, in addition to the global crisis resulting from the war in Ukraine.

Finally, the study concludes with several recommendations to address the problem, including regulating and monitoring letters of credit, encouraging import mechanisms to increase food commodity imports, raising the level of strategic reserves to meet demand, reforming the agricultural sector to increase productivity and achieve self-sufficiency, exempting food commodities from customs duties, controlling government spending, increasing taxes on luxury goods, and regulating the money supply.