By Siham Ali
By Siham Ali
Rabat, July 3, 2012
Morocco is working to overhaul the Caisse de Compensation, the country’s primary vehicle for aid to the poor.
In just five months, the country has spent 80% of the year’s budget for subsidies.
Morocco set aside 32.5 billion dirhams for subsidies this year, but soaring prices across the world are making it impossible to hit targets. The government decided to increase the price of petrol by 2 dirhams per litre, 1 dirham per litre of diesel and 998.04 dirhams per tonne of industrial fuel.
A great deal of thought went into the decision so that investment and public debt levels would be cushioned, minister delegate for the budget Driss Azami el Idrissi said. But even with this increase, the government will now have to seek other ways to fund the Caisse de Compensation, he explained.
Prime Minister Abdelilah Benkirane stressed that the government would not have decided to raise fuel prices if this had not been necessary for the national economy.
The fund will be restructured in September to improve the way in which it allocates subsidies.
On June 4th, the Competition Council suggested that the prices of subsidised products be deregulated in order to save around 50 billion dirhams from the state budget.
At the same time, the Council called for measures to lessen the direct impact on people’s wallets, especially for the poor. In particular, these measures include tax adjustments—abolition of VAT and import customs duty— and the provision of direct aid for certain classes of people and sizes of businesses.
The Competition Council also suggested a payment of 500 dirhams per household per month for people living below the poverty threshold, financial support in the amount of 250 dirhams per household per month for people benefiting from the RAMED health insurance scheme who are not classed as poor and financial support for businesses.
Caisse de Compensation reforms have already begun with the launch of RAMED for the less well-off, economist Ali Guelmat said. He asserts that the government should have waited for the process of identifying which people will receive direct financial support to be completed before pressing ahead with price hikes. However, he conceded that the government is in a difficult position given that the government’s tax only covers 60% of its expenditure which would force the government to borrow money from abroad.
Public concern is mounting over the prospect of reforms to government subsidies as people are already reeling from the impact of higher prices for fuel despite the government’s claim that it is carefully watching for signs of speculation.
“At the market, the prices of fruit and vegetables have gone up a lot,” student Rania Sellami said, describing how her mother Zohra laments the higher prices at the market. If the government decides to withdraw subsidies, the less well-off and the middle class will suffer, she explained.
She said she was angry when the “grand taxi” fare between Sale and Rabat rose by a dirham after fuel prices increased.
“People expected the PJD government to raise living standards, not to implement measures that lessen Moroccans’ disposable income,” she said.