Exogenous oil shocks and the fiscal policy response in oil-exporting countries: evidence from Libya

The downtrend in oil prices beginning in 2014 represents a challenge for small­open developing and exporting economies like Libya. This stems from the importance of government revenue generated from the natural resource sector in financing government consumption and investment expenditures as well as capital imports. The dependency on the natural resource sector and a relatively weak non-natural-resource tax base renders fiscal positions highly challenging in oil­ exporting countries. As more than 90 percent of Libya's government revenue is generated from the oil sector, the budget components are the most influenced by oil-related shocks. Transitory oil price increases, especially after 2000, brought