By Loubna Flah
Morocco World News
Casablanca, June 20, 2013
The Minister in charge of Public Affairs and Governance, Mr. Najib Boulif, announced last week that the Administrative Council of the Compensation Fund has decided to reduce the amount of its total expenditure for the year 2013 in compliance with the finance law.
The compensation fund is a stock that is aimed primarily at boosting the purchasing power of the lower classes through a system of subsidies. The fund uses tax revenues to contribute partly in the purchase of basic commodities like flour, fuel and sugar in order to control inflation and to achieve social justice.
The minister asserted that there was an agreement within the government to reduce the compensation expenditure to MAD 40 billion ($ 4,7 billion).
A statement made by the head of government revealed that the expenditures for Butane fuel and sugar reached MAD 53,369 billion ($6,3 billion) in 2012, compared to MAD 48,475 billion ($5,7 billion) in 2011.
The same source reported that, in 2012, subsidies for fuel reached MAD 32, 4 billion ($3,8 billion), Butane fuel subsidies reached MAD 15, 8 billion (1,7 billion), whereas subsidies for sugar reached MAD 5 billion ($5,9 billion).
The minister described the decision to lower the compensation fund expenditure as a “positive move”.
The decision to reduce the fund subsidies will automatically cause staple food prices to soar and will eventually affect the purchasing power of a large segment of society, including the middle class.
The minister added that the policies for state subsidies for the current year are under study and “many possibilities are envisaged.” The final decision will be conditioned by the fluctuation in the prices of the subsidized commodities in the international markets.
In this regard, the head of government, Mr. Benkirane, said that the reform of the compensation fund is “one of the government priorities in to support the most deprived segments of society and to achieve social justice.”
He added that the government will use gradual, rather than outright reform policy for the compensation fund, hence the need to mobilize all the material, the human resources and the mechanisms liable to hasten the reforms.
The government’s decision to reduce the compensation fund expenditures subscribes to a larger austerity policy requested by the IMF. By squeezing public spending, the government tries to reduce fiscal imbalances at the expense of social sectors like education and health.
This kind of structural adjustment are often necessary conditions for getting new loans from the International Monetary Fund (IMF), or for obtaining lower interest rates on existing loans. These conditions force the debtor country to concentrate more on trade and production rather than social programs.