By Souhail Karam | Reuters – 6 hrs ago
RABAT (Reuters) – Morocco’s recently elected Islamist-led government aims to cap the budget deficit at 5 pct of GDP in 2012, a minister said on Wednesday, after extra spending in the wake of regional unrest helped push the shortfall last year to its highest level since the 1990s.
“The budget deficit in 2011 stood at 6.1 pct of GDP,” Idriss Azami al-Idrissi Azami, minister in charge of the budget, told Reuters by telephone, revising up a 5.6 percent of GDP estimate last month by the minister in charge of general affairs and governance.“We are not extremely worried about the level of the budget deficit,” Azami said. “We are determined to restore balance in public finances. We plan to bring it down to 3 percent by the end of our mandate in 2016 by making better use of fiscal resources, reforming the tax pool and rationalizing spending.”
Anxious to avoid the kind of unrest seen in other parts of the Arab world and worried about increases in global commodity prices, the government last year raised public sector wages and has more than trebled funds for food and energy subsidies to over $6 billion.
Those moves have raised pressure on the budget deficit, especially at a time when the slowdown in the European Union, Morocco’s main trading partner, has eaten into the government’s tax, customs revenues and its foreign currency reserves.
Azami downplayed concerns over the state’s ability to refinance the budget deficit.
“Our debt/GDP ratio rose to 52 percent in 2011 which is manageable. The domestic and external financing resources are available. We will be able to finance it (the deficit) easily,” he added.
The debt/GDP ratio stood at 49.3 pct in 2010, according to finance ministry.
Azami is from the moderate Islamist party that won an election in November. The Arab world’s longest-serving monarchy brought forward the poll by almost a year to pre-empt the sort of popular revolt that has ended the rule of four Arab leaders.
Azami confirmed that the government aims for 4.2 percent economic growth this year, in line with a central bank forecast for 4-5 percent growth.
The central bank also estimates the economy grew by 4-5 percent last year, down from an earlier forecast of 4.5-5.5 percent due mostly to the slowdown in the European Union.
