By Souhail Karam
By Souhail Karam
Rabat, June 7, 2012
Morocco’s prime minister on Wednesday promised direct grants of cash to the poor under a planned reform of the costly subsidy system, after his Islamist-led government imposed last week one of the sharpest rises in fuel prices in several years.
Abdelilah Benkirane invited needy Moroccans to open bank and postal accounts to ensure they benefit from the reform, one of the boldest moves taken by his government, led since January by Justice and Development, a moderate and former opposition Islamist party.
On May 29, General Affairs and Governance Minister Najib Boulif told Reuters the subsidy reform would take place before end-June amid worsening economic indicators and pressing demands for jobs and less poverty.
Speaking to state television channels, Benkirane however has not fixed a precise timeframe for the completion of the reform, saying only the “gradual” process may be completed before the end of his government’s mandate, due towards the end of 2016.
“The subsidy fund was set up to help the poor and the needy … We are going ahead with the reform of the subsidy fund … We will seek to fix the expenditure on the subsidy fund and directly send that (money) to the …. needy people.
“To do this, I will need statistics – which I will eventually have – and Moroccans will need ID cards, (they need to be) poor and vulnerable and have a bank or post account,” said Benkirane, who seldom allows state television reporters to ask questions.
Banking penetration in Morocco barely reaches 50 percent due mostly to an important grey economy. Amid an accute and now-chronic shortage in liquidity, banks will be looking forward to adding new customers, from a quarter of the 33-million population that lives in poverty.
SUBSIDIES FAVOUR AFFLUENT
Government officials say close to 70 percent of the funds spent on subsidies goes to the wealthiest fifth.
Reforming the subsidy system has taken centre stage after Morocco’s budget and current account deficits stood at around 6 percent of its $100 billion GDP in 2011, close to the amount of money it spent the same year to subsidize wheat, sugar and energy products.
In 2012, Rabat raised taxes on alcohol and imposed a new tax on firms to develop poor areas and help quash discontent over social inequalities. But it also reduced budgeted spending on subsidies by 36 percent from its level last year.
“This (subsidy) fund has to benefit those who need it the most to restore some social balance. This is not the case today … For fuel subsidies, the poor benefit six times less than the wealthy,” Benkirane said.
Last week, the net energy importer sharply raised prices of fuels, which take the bulk of subsidies, amid rising energy prices and slackening economic activity due to the impact of drought on agriculture and troubles in the key eurozone market.
Benkirane said the increase in fuel prices was essential because budgeted subsidy spending would have otherwise increased by 26 billion dirhams to 58 billion dirhams.
“This year we budgeted 32.5 billion dirhams ($3.68 billion)to subsidies … We need to control this spending … We can’t allow it to reach 51 billion dirhams (of 2011). How can you cover that?” Benkirane said.
Earlier on Wednesday, the country’s planning authority HCP predicted economic growth of 2.4 percent for 2012, which is below the downwardly revised 3.4 percent the government predicted few weeks ago, but closer to the central bank’s estimate.
Morocco’s wheat and sugar import needs are expected to jump sharply after bad weather hurt agriculture while the unfolding crisis in the European Union – Morocco’s main trade partner and aid purveyor – is undermining exporters and tourism operators.