Morocco plans subsidy reforms

With the state spending billions of dirhams on subsidies, the Moroccan government is moving to reform the system to better serve the kingdom’s neediest citizens.

By Siham Ali for Magharebia in Rabat – 27/03/12

[AFP/Abdelhak Senna] Diesel is just one of the products heavily subsidised in Morocco.

Morocco is setting aside 32.5 billion dirhams for the compensation fund this year, on top of the 14 billion dirhams of arrears. Consultations began on Tuesday (March 20th) on the implementation of long-awaited reforms.

Compensation weighs heavily on the state budget. Over five years, expenditures reached 150 billion dirhams (13.4 billion euros), the equivalent of 6% of GDP.

Now Abdelilah Benkirane’s government has promised to reform the compensation system in 2012 by setting a spending cap of 3% of GDP, while enabling the most deprived in society to benefit more from state support.

At the moment, those who spend the most benefit the greatest from subsidies due to the fact they consume the largest amounts of subsidised food and fuel. Diesel tops the list of subsidised products, with the subsidy costing 19 billion dirhams last year. Butane gas was close behind at a cost of 12.7 billion dirhams, followed by fuel for electricity at 6.7 billion dirhams. Petrol, sugar and flour subsidies also cost billions of dirhams.

The compensation system helped Morocco avoid social tension, according to Najib Boulif, the minister delegate for general affairs and governance. He said the government subsidies managed to preserve the public’s purchasing power, especially at a time of economic crisis, and supported a number of productive sectors. This, he said, had secured thousands of jobs.

But Boulif pointed out that the system had many shortcomings and the state was failing to keep subsidy costs under control.

He said that there should be wide involvement in the reforms, because there are a number of productive sectors which benefit a great deal from the compensation system.

According to Hassan Bousselmane, the director of competition and pricing at the economic and general affairs ministry, reform is a task on the national scale, which must be based on a spirit of solidarity and social cohesion, with due consideration for the interests of the middle class.

The idea of the reforms centres on targeting the poorest populations so that they can receive state assistance directly. But deciding whom to target is another problem. According to Bousselmane, the newly launched medical assistance regime for the financially disadvantaged (RAMED) will help fine-tune the targeting system.

Mohammed Benkeddour, who chairs the Consumer Protection Association, said that launching reforms of the compensation system was a brave act. He added the reforms must be introduced progressively, making sure that the purchasing power of people in the middle class is not undermined.

A huge effort is needed to keep the prices of basic products where they are, according to Nadira Guermaï, governor of the National Human Development Initiative. She said that an awareness campaign needed to be organised to inform the public of the need to rationalise consumption and to highlight the value of reforms.

Speaking for the sectors which benefit from the subsidies, the chairman of the National Federation of Millers, Ahmed Bouaïda, said that the spirit of citizenship was alive and well among those working in the industry, who were ready to play an active part in instituting reforms.

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