Morocco delays subsidy cuts amid geopolitical challenges

Morocco’s government is postponing further subsidy reductions due to the impact of geopolitical tensions on prices, according to Fouzi Lekjaa, the minister responsible for the budget, who spoke to Reuters.

In preparation for reforming the subsidy system, Morocco has introduced a national registry to identify households requiring direct cash assistance. 

“Subsidies reform remains a priority,” said Fouzi Lekjaa. He also acknowledged that the current geopolitical climate does not offer clear price visibility.

Lekjaa, speaking at the IMF-World Bank meetings in Marrakech, suggested that the reform would resume when more favorable conditions prevail.

The country’s subsidies expenditure until July had reached MAD 17 billion, marking a 32% decrease compared to the previous year when the annual cost of supporting prices had surged to MAD 42 billion  due to elevated soft wheat and butane gas prices.

Lekjaa said that the government aims to further reduce the fiscal deficit to 4% in 2024, down from the anticipated 4.5% for the current year. 

“Safeguarding macroeconomic balances is a strategic goal for public finance,” he said. 

While discussing the efforts to rebuild after the earthquake, Lekjaa expressed optimism regarding their positive impact on economic growth.

Lekjaa said that although subsistence farming, the primary economic activity affected by the earthquake, was severely impacted, other sectors such as tourism would help counteract these losses.

As part of the country’s response to the earthquake, Morocco announced a five-year reconstruction plan worth $12 billion, which includes infrastructure upgrades. 

Lekjaa said that the funding for quake reconstruction would not come from debt but rather from various ministerial departments’ budgets, a special relief fund, and international cooperation.

It’s worth noting that Morocco initiated subsidy cuts on fuel in 2015, a move that received approval from the International Monetary Fund (IMF). But the country continued to regulate the prices of essential commodities such as soft wheat, cooking gas, and sugar.