x Abu Dhabi, UAEMonday 24 July 2017

Morocco to reform subsidies

Morocco has signalled it is prepared to meet IMF demands to reform its expensive system of subsidies for food and energy.

Morocco has signalled it is prepared to meet IMF demands to reform its expensive system of subsidies for food and energy.

The country needs only to reach a political consensus on the issue, a statement by the general affairs and governance minister Mohamed Najib Boulif said.

"Technically, the reform of the subsidies system is quite ready," Mr Boulif said. "Once talks are concluded and the political decision is taken, it will be launched."

State subsidies on food and energy shot up to 53 billion Moroccan dirhams (Dh22.89bn) last year - 15 per cent of total public spending - from 48.8bn in 2011 and 29.8bn in 2010.

The reform is politically sensitive in a country that saw street protests demanding political reforms and better economic management in the wake of the Arab Spring.

The government is now seeking to repair its finances by reducing the subsidies and shifting the focus of spending to the poorest Moroccans. It plans to replace the current subsidy system with monthly cash payments of 1,000 dirhams to as many as 2 million of the most needy families.

However, "the risk of the reform is the impoverishment of the middle class," the finance minister Nizar Baraka has said in a parliamentary debate.

Last August, the IMF approved a US$6.2bn (Dh22.78bn) precautionary line of credit for Morocco over two years while urging action to reform the subsidy system.

The cash-strapped country also raised $1.5bn with an international bond issue in early December, which lifted its foreign currency reserves to 146bn dirhams - but this only covers about four months of import needs.

Rabat aims to cut the state budget deficit to 4.8 per cent of GDP this year from an estimated 6 per cent last year. It is projecting GDP growth of 4.5 per cent this year.

* With Reuters