National Observatory of Government Work echoes popular demands to deal with living costs crisis

Domestic inflation felt by many Moroccans is reflected in the country’s economic indicators, was displayed and explained in the recent Observatory of Government Work’s (OGW) recent report, as the institute issues recommendation that mirror popular demanded solutions.

Inflation in Morocco has reached unprecedented levels, as the economy ended 2022 with an inflation rate of 6.6%, while the food price index rose by 11%.

The and more indicators reflect the difficult situation that the national economy is going through, caused by the succession of the COVID-19 pandemic, drought and the ample geo-political happenings.

The OGW delivered its observations on the difficult national situation, and the measures taken by the government, as well as its recommendations in this sense in a recent output.

Regarding the national economic situation, it is certain that it has been directly affected by global crises, says the Observatory, which has had serious repercussions on the domestic economy’s performance and the high rate of inflation and prices, given the great dependence of Morocco on imported basic goods and energy.

The Observatory recalled that Morocco’s food imports bill increased by 44.9% in 2022 to reach MAD 86.72 billion, driven by an increase in imports of wheat and cereals due to drought.

This increased demand coincided by higher prices on international markets, while the energy bill amounted to MAD 153.5 billion, an increase of 102%.

The Moroccan economy has also been affected by successive years of drought and its impact on agricultural production, the Observatory points out, noting that the national production of cereals in 2022 exceeded 34 million tons, with a decline of 67%, raising the impact of this decline on the growth of Gross Domestic Product (GDP).

The economic recession in the Eurozone has also had a direct impact on the Moroccan economy, says the Observatory, especially since the EU is considered top economic partner of the Kingdom.

This northern lull affected growth and exacerbated Morocco’s demand for imports, deepening the trade defici, which increased by 56% in 2022.

All of these factors combined resulted in Morocco recording a growth rate that does not exceed 1.5% in 2022.

Government measures under scrutiny

After exposing the difficult economic situation that the country is going through, the Observatory looked at the government’s actions to deal with it.

For the Observatory, the Akhannouch government has put in place a set of interventions and measures to reduce the impact of inflation on the purchasing power of citizens and maintain price stability of a set of commodities.

Among its monetary, financial and fiscal measures, the Observatory mentions the doubling of the Compensation Fund’s allocations from MAD 16 billion to MAD 32 billion in 2022, in order to maintain the prices of wheat, sugar and butane gas at their usual consumer prices.

The Observatory cites support granted to the National Office of Electricity and Drinking Water (ONEE), amounting to MAD 5 billion, in order to maintain prices and ensure the continuity of the exercise of its missions, given the increase in the cost of raw materials.

In addition, the note highlights the direct financial support distributed to transport professionals, amounting to little over MAD 4 billion as of this date.

Regarding monetary measures, the Observatory cites the increase in the key interest rate from 1.5% to 2.5%, in order to control the financial supply in the domestic market and mitigate the impact of inflation, as well as the purchase of treasury bills on the secondary market.

As for fiscal measures, the Observatory recalls the cessation of the collection of import duties imposed on soft wheat and its derivatives, the cessation of the collection of import duties on oilseeds and crude oils, the cessation of the collection of import duties imposed on domestic cows, as well as the cessation of the collection of value-added tax on cow imports.

The Observatory issues its recommendations

As part of its ongoing monitoring of various government interventions, the Observatory notes the government’s inability to have a vision for resolving and reforming the structural imbalances in the structure and system of supply of various products and materials to Moroccan markets.

The lack of willingness of the government to fight against monopoly and speculation, especially in food, its existence and its responsibility in the worsening of the situation, was also raised by the Observatory.

The observatory pointed to the executive’s refusal to address the problem of fuel monopoly in the country and its disregard for official reports on the matter, which exacerbate the energy crisis.

Despite the recognition of government members and components of the necessity to tackle this issue, including the report of the Competition Council clearly stressing that the fuel market is subject to a monopoly, the executive has remained silent on the matter.

The Observatory alarmed to the lack of forward-looking vision necessary to anticipate solutions to the crises, and the procrastination in the elaboration for appropriate solutions to prevent the worsening of the crisis of rising prices, especially with regard to food goods.

Regarding the agricultural sector, the Observatory believes that the government is reluctant to reformulate a Moroccan agricultural map, based on the essential needs of Moroccans in terms of strategic crops, mainly those related to cereals and oilseeds, which would strengthen the Moroccan food security, while clinging to the marketing of crops for export.

Similarly, the entity raised the unjustified reluctance of the government to accelerate the transition to renewable energies, which would guarantee Moroccan energy security, reduce the high energy bill and strengthen the national product of energy dependence on international suppliers.

This would Morocco fluctuations resulting from the tensions and imbalances that occur in global energy markets and their direct impact on the purchasing power of citizens, but remains of low pace to the observatory.

In this regard, the Observatory recommends to the government to strengthen control and monitoring mechanisms on national markets and the evolution of prices, by redirecting human resources of concerned sectors concerned, to strengthen the physical monitoring on the ground.

The government is also called to suspend, temporarily, the collection of a number of taxes related to the sale of food products that causes price increases during the current critical period, especially the added value tax, and spare consumers from paying rentier profit margins.

Regarding fuels, the Observatory reiterated calls for the immediate activation of the roles of the institution of control of competition and enforcement of the law in relation to the monopoly practiced by fuel companies, while accelerating the publication of the implementing decrees of the law on the Competition Council.