Government subsidies to basic commodities Beware of abuses!
Between 2016 and 2021, expenses related to Government subsidies have been reduced. They did not exceed 14 billion MAD, except in 2019 when they reached 18.7 billion MAD. Before the removal of the fuel price subsidies, such expenditures could reach significant levels: 55.9 billion MAD in 2021 for example
New alert concerning the burden of Government subsidies to basic commodities! This time the alert emanates from the Moroccan center for the analysis of the business situation (Centre marocain de conjoncture, CMC) which warns against the risks that would result from its increase on “the planned restructuring and coordination of all social aid likely to improve the standard of living of citizens and to reduce the social gaps that plague Moroccan society”.
Three products are concerned: butane gas, sugar, and national soft wheat flour. For the moment, the Government has ruled out any return to subsidies for petroleum products to avoid impacts on the implementation of major transformational projects, including that of the generalization of social protection. For the CMC, geopolitical tensions, the various conflicts between countries, the climate hazard which is becoming increasingly burdensome on the various activities, as well as the total or partial exit from the health crisis are the determining factors of the uncontrolled evolution of prices. This entails a “difficulty in the viability” of the Caisse de Compensation (the government entity created with the aim of subsidizing the prices of basic commodities to maintain the purchasing power of citizens). “The latter is in a delicate situation with very costly interventions to avoid slippages likely to generate economic and social imbalances”. At the end of May, the cost of subsidies reached 15.6 billion versus only 6.3 billion during the same period last year, thus posting an increase of 148.9%. This represents 92.2% of the total amount adopted in the Appropriations Bill. An extension of 16 billion MAD has just been granted by the government. CMC experts fear an explosion of expenditures related to subsidies: “If this trend continues, expenditures related to the subsidy could approach 40 billion, a level similar to the one observed in 2014”.
The immediate challenge is to support efforts to increase the country’s economic and health resilience by strengthening the capacity of the health system to enable it to react quickly to a shock such as the one produced by the recent pandemic. The idea is also to be able to “make greater use of appropriate rapid response mechanisms to cushion economic shocks and promote the resilience of supply chains”.
Experts from the CMC center recommend concentrating efforts on controlling spending and strengthening control over the allocation of public funds. Similarly, social benefits should be oriented and appropriate mechanisms put in place to enable a large segment of the population to adapt to the changes underway both economically and socially.
