Bloomberg News

Morocco Says Subsidy Cuts Dependent on Commodity Prices

June 11, 2013

June 11 (Bloomberg) - Morocco will find it hard to cut subsidies as long as oil prices stay high, General Affairs and Governance Minister Najib Boulif said, even as the country comes under pressure from the International Monetary Fund.

“If oil prices were to fall drastically, so would the size of the financial effort we would need to make to dismantle subsidies for fuels,” Boulif said by phone from Rabat. “As long as global commodity prices are high, the reform of the subsidy system will be difficult to implement.”

Any reform would “be gradual and stretch over three to four years,” the minister said today.

Subsidies accounted for over 80 percent of Morocco’s 7.1 percent budget deficit posted in 2012, higher than the government’s 5.5 percent projection. The government has raised wages, pensions and spent more on subsidies every year since protests over unemployment and living costs inspired by the Arab Spring revolts swept through the region in 2011.

Morocco’s $100-billion economy was granted a $6.2 billion liquidity line by the IMF last year. The government pledged to reform its subsidy, tax and pensions systems and bring the deficit down to 3 percent by 2017. Morocco imports all its oil, gas and coal needs, and relies on sugar and wheat imports to meet domestic needs. Those imports accounted for 60 percent of the trade deficit in 2012, which stood at 197 billion dirhams or 23 percent of GDP.

A few days after meeting an IMF delegation on a consultation visit to Morocco, Prime Minister Abdelilah Benkirane said Moroccans should brace for “painful measures to come.”

“They were asking ‘what are you going to do with the reforms because your situation is shaky as far as the IMF is concerned’,” Benkirane said of members of the IMF delegation, in a video posted on his Islamist Justice and Development Party’s official Website this week.

“Morocco today lives beyond its means,” he said. “You have to adjust the state consumption to levels you can control, otherwise creditors will come knocking.”

For Related News and Information:

To contact the reporter on this story: Souhail Karam in Rabat at skaram5@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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