The latest pledge to reduce Libya's enormous state subsidies bill has come from oil and gas minister Abdelbari al-Arusi, who says the government aims to cut out all fuel subsidies within three years.

Al-Arusi recently told Reuters that he expected both petrol and diesel subsidies to be phased out over the next three years, with awarness campaigns to help people prepare for the change.

Fuel accounts for by far the largest proportion of state spending on subsidies, with government figures from the first half of 2012 showing that it devoured some LD3.5bn ($2.8bn), or 61% of all expenditure on subsidies.

In addition to fuel, the government also maintains artifically low consumer prices on a range of other products and services including electricity, water, foodstuffs, pharmaceuticals and animal fodder. 

Last year it spent a total of LD11.4bn ($9.1bn) on subsidies, or around 19% of the total allocated budget for 2012.

In addition to consuming large amounts of public money, subsidised goods have also been a root cause of instability at Libya's borders with Egypt and Tunisia, where illegal exports of cheap Libyan fuel have prompted clashes over control of lucrative smuggling routes.

Plans to reform the system have been in progress for some time, and are expected to replace the current scheme with direct financial payments to the most needy families.

It will be a major logistical challenge in the current environment to accurately identify the lowest-income sections of society, and a major ideological one to persuade the wider population to pay higher prices.

On the positive side, plenty of other countries have enacted subsidies reform - some successfully, others less so - and Libya should be able to learn useful lessons from elsewhere.