RABAT, June 14 (Reuters)
RABAT, June 14 (Reuters)
Morocco‘s 2011 budget deficit will be higher than previously forecast at 4.5 to 5 percent of gross domestic product after another increase in state subsidies and public sector pay hikes, the central bank said.
However, the forecast excludes the sale of state assets, a source of revenue the government has started to tap to keep the deficit under control without having to seek foreign credit.
The government last month netted 5.3 billion dirhams ($676 million) from the sale of a stake in Banque Centrale Populaire and L’Economiste newspaper on Tuesday quoted the local Delta Holding as saying it paid 655 million dirhams to buy a government-owned salt firm.
Anxious to avoid the kind of unrest seen in other parts of the Arab world and worried about increases in global commodity prices, Morocco has in recent months raised salaries and almost doubled to 35 billion dirhams funds for subsidies.
The government’s target for the deficit this year had been 3.5 percent of GDP, but central bank governor Abdelatif Jouahri told a news conference the figure would be closer to 5 percent.
“The budget deficit should stand at between 4.5 and 5 percent in 2011 … This forecast excludes privatisation receipts,” Jouahri said.
That was due in part to a rise in subsidies on items such as wheat, sugar and fuel. The subsidies bill for this year will total 45 billion dirhams ($5.74 billion), Jouahri said.
“It almost equates to the state’s investment expenditure … We are reaching incredible levels (for subsidies),” said Jouahri, who declined to say whether public finances would be able to sustain a subsidy bill of the same scale in 2012.
Jouahri noted that a wage hike the government agreed in May for its army and public sector employees would cost an annual 8.6 billion dirhams and 5 billion dirhams for the eight months of its implementation in 2011.
Amid slowdowns in both money supply and deposit growth ratios, those wage hikes, Jouahri said, would boost consumption and economic growth without ratcheting up inflation.
Jouahri has actually revised down his 2011 forecast for headline inflation to 1.4 percent from 2.1 percent previously, a move he attributed to falling food prices.
Annual growth in M3 money supply slowed to 4.1 percent in April from 4.3 percent in the first quarter of 2011 and 5.4 percent in the fourth quarter of 2010, he said.
“The monetary market is not exerting any inflationary pressures,” Jouahri said.
While public finances are under greater pressure, the central bank said the broader economic picture was stable.
In a statement issued after a quarterly meeting of its monetary board, the bank said it had decided to keep its benchmark interest rate unchanged at 3.25 percent.
The bank also said it expected bank lending to grow by 8 percent by the end of this year, against annual growth of 6.8 percent in April. Deposits by the end of April recorded annual growth of close to 4 percent.
With no oil or gas of its own, Morocco relies heavily on agriculture, tourism, transfers by close to three million Moroccan migrants and phosphate mining.
The grain harvest, Jouahri said, would come in at 7.8 million tonnes, slightly better than last year but below the agriculture ministry’s forecast of 8.8 million tonnes.
Exports are not however growing enough to keep the trade deficit in check as energy prices soar, resulting in more pressures on local banks’ treasuries. Foreign currency reserves now cover about 6 months of import needs versus 7 months a year earlier, Jouahri said.
Tourism receipts and transfers by migrants recorded annual rises of 8 percent and 6.8 percent, respectively, up to the end of May, Jouahri said.
Both overall gross domestic product and nonagricultural GDP were forecast to grow between 4.5 and 5.5 percent in 2011, the bank said in its statement. This was broadly in line with previous government forecasts. ($1=7.841 Moroccan dirhams)