Libya's payroll expenditure has witnessed a significant surge, rising from approximately 21.8 billion dinars in 2020 to 73.3 billion dinars in 2025. This substantial increase of over three times in just five years has sparked concerns about the sustainability of state finances. The rapid growth in payroll costs has been driven by a series of salary hikes and expanding financial commitments by the state. According to data from the Central Bank of Libya, payroll expenses reached around 67.6 billion dinars in 2024 and 46.9 billion dinars in the first eight months of 2026.
The sharp increase in Libya's payroll bill has raised questions about the state's ability to absorb these costs in the long term, particularly given the economy's heavy reliance on oil revenues. Experts warn that without a comprehensive overhaul of public finances and the job market, the continuous rise in salaries may lead to an endless cycle of increases. Dr. Rajab Gith, a former member of the Central Bank of Libya, attributes the surge in payroll costs to "random" salary hikes that have not been linked to improving the living standards of all employees.
Dr. Gith cautions that the ongoing increases in salaries without addressing the underlying causes of declining purchasing power may exacerbate inflationary pressures. He notes that while employees may experience a rise in their nominal income, this may not translate to an improvement in their real income if prices increase at a similar or faster rate. This phenomenon, known as the "financial illusion," occurs when the increase in salary is offset by rising prices, leaving the employee's purchasing power unchanged.
The Libyan economy's heavy reliance on oil revenues has raised concerns about the state's ability to sustain its payroll commitments. Dr. Abu Sief Aghniya, an economist and financial expert, notes that the increase in payroll costs should not be viewed as a natural consequence of improving employee salaries, but rather as a challenge to the state's ability to sustain these commitments. He cites data from the International Monetary Fund, which shows that Libya's payroll expenditure accounted for around 30% of its GDP and 50% of current spending in 2024.
Dr. Aghniya argues that the root of the problem lies in the continuous expansion of payroll costs without a corresponding increase in income and production sources. He warns that this approach may reinforce the rentier economy model, which relies on distributing oil revenues rather than creating new sources of wealth and income. The expert emphasizes that the state's ability to pay salaries should not be measured solely by its ability to meet these commitments during periods of high oil revenues, but also by its capacity to sustain them during times of economic stress.
The surge in Libya's payroll bill has significant implications for the country's economic future. With the economy heavily reliant on oil revenues, experts stress the need for a comprehensive reform of public finances, the job market, and monetary policy. This would help prevent each new salary increase from becoming an additional financial commitment, triggering a wave of similar demands from other sectors. The question remains: can Libya sustain a payroll bill exceeding 73 billion dinars annually with an economy primarily driven by oil?
As Libya navigates these challenges, experts recommend a cautious approach to salary increases, accompanied by measures to stabilize prices and exchange rates. Dr. Gith suggests freezing salaries for a specified period, such as five years, and introducing clear criteria for future increases. Dr. Aghniya emphasizes the need for a fair and sustainable salary structure, linked to economic reforms and increased productivity. Ultimately, Libya's ability to manage its payroll commitments will depend on its capacity to implement comprehensive economic reforms and diversify its revenue streams.
Key points
- Libya's payroll bill has surged to 73.3 billion dinars in 2025, a threefold increase in five years.
- The rapid growth in payroll costs has been driven by a series of salary hikes and expanding financial commitments by the state.
- Experts warn that without a comprehensive overhaul of public finances and the job market, the continuous rise in salaries may lead to an endless cycle of increases.
