Rabat – The World Bank has urged Morocco to introduce environmental tax reforms and water valuation policies to trigger behavioral changes.
In its latest publication titled “Morocco Country Climate and Development Report,” the bank recommended the “elimination of “brown” tax expenditures, the removal of explicit butane gas subsidies, the introduction of a “carbon tax,” and the increase in water tariffs in Morocco, in order to force a change in consumer behavior and generate climate benefits.
Over the short term, the reforms are expected to boost the country’s GDP by 2%, the report indicated.
However, the bank’s long-term analysis predicts that the measures’ “macroeconomic impacts would be better than those of an equivalent tax reform.”
The World Bank’s recommendations underline previous recommendations, dating back to structural reforms in the 1980s as part of the US-driven “Washington consensus,” pushing neoliberal economics. The measures call for cutting public expenditure in all sectors including education and healthcare, as well as providing incentives for the private sector, leading to gradual privatization.
The suggested reforms further urge countries to cut public subsidies. However, these measures have backfired in numerous socio-economic settings.
The increase in butane and water prices is likely to trigger public uproar in Morocco, particularly among vulnerable communities, since the two commodities are essential to their livelihood and basic living standards.
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Aware of these challenges, the World Bank argued that the measures “should be carefully crafted to ensure an equitable transition” when prices are more stable.
The bank also recommended providing compensation to poor and vulnerable people, to offset the impact of the soaring bills.
“A well-targeted cash transfer program could be the best compensation option to offset the negative impacts on the most disadvantaged households,” the report indicated.
Because Moroccans do not have natural gas delivered to their homes for heating and cooking like in most Western countries, butane canisters provide for their essential needs. Given the importance of maintaining a sustainable supply of butane gas to all Moroccans at an affordable price, the Moroccan government has maintained its subsidies of butane throughout the years despite fluctuations in gas prices.
In April, Government Spokesperson Mustapha Baitas stated that “the government has no intention to stop subsidizing gas” despite the surge in gas prices resulting from the war in Ukraine Baitas added that the commodity is subsidized by the country’s compensation fund.
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