The Role of Foreign Direct Investment in Achieving Libya's Balance of Payments Equilibrium

Abstract

This paper: aims to examine the role of foreign direct investment (FDI) in achieving balance in Libya’s balance of payments, given the significance of the period under study and the economic and political transformations experienced by the country. To achieve this objective, the study adopts a mixed-methods approach that integrates both qualitative and quantitative methodologies. The descriptive–analytical method is employed to address the theoretical framework, while the empirical analysis relies on an econometric approach based on time series analysis. The statistical software EViews 13 is used as the primary tool for econometric estimation,The main results derived from the regression model indicate the existence of a statistically significant positive and long-run equilibrium relationship among the variables. The findings demonstrate that a one-unit increase in foreign direct investment and in the money supply leads to an increase in Libya’s balance of payments by approximately 0.455 and 1.981 units (Libyan dinars), respectively. These econometric results are consistent with economic theory. Based on the findings, the paper concludes with several recommendations, most notably the need to establish developmental projects to stimulate economic progress, encourage and intensify economic research and studies, and place particular emphasis on the development of non-oil economic sectors.