Muammar Gaddafi's plan to hand oil revenues directly to Libyans has run up against opposition from officials, state media said on Wednesday in a rare glimpse into state decision-making in the north African country.

Officials including Prime Minister Al-Baghdadi Ali al-Mahmoudi and central bank governor Farhat Omar Bin Guidara said that the move, and a related plan to abolish most of the state apparatus, could do long term damage to the OPEC member country's economy, the official Libyan news agency reported.

Gaddafi was adamant his plan was correct, Jana said.

"What you want is that the...situation remains unchanged so you can keep your positions. That is the psychology that underpins your arguments," Jana quoted Gaddafi as saying at a meeting on Tuesday with senior officials including al-Mahmoudi and Bin Guidara.

Gaddafi, complaining about ineffective ministries and corrupt officials, said in March the government should hand oil wealth directly to the people so they can choose where to get basic services. He also urged a sweeping reform of government bureaucracy, saying most of the cabinet system should be dismantled to free Libyans from red tape and protect the state budget from graft.

Gaddafi said on Tuesday that Libyans should not trust government bureaucrats to manage their money.

"Whatever, you have to think about how the oil money will be distributed directly to the Libyans."

"There is no ruse here. People cannot be fooled. This oil belongs to the Libyans. They have to take the oil money and do whatever they like with it," Gaddafi said.

The officials raised their hands one after another to plead with Gaddafi that handing out money would fan inflation by spurring wild consumption instead of expanding production, and would hinder efforts to sustain growth and social development.

"I tell you frankly the best alternative to the direct distribution of the oil money is we build investment portfolios where people will invest the money from the oil earnings," al Mahmoudi was quoted as saying.

Bin Guidara was quoted as saying there would be big problems if the oil money was distributed directly.

"Firstly, the inflation and the possibility of finding ourselves unable to defend the value of the Libyan dinar and the dinar would lose its value and probably we will have deficit in the balance of payments."

"This would cause a decline in people incomes," he said. The officials proposed making Libyans shareholders in the country's banks, manufacturing plants, telecommunications companies and other businesses through portfolios managed by banks and brokerage houses of their choosing, instead of being given directly the oil money.

They argued that oil revenues were subject to swings in price on international energy markets.

Many Libyans say they have not benefited from rising oil revenues and foreign investment.


Reuters