Food price shocks necessitate Moroccan welfare state
Global food prices have hit their highest levels in over a decade, after rising by more than 30 percent in the last year. Energy and transport costs drove this increase, as demand for natural gas and shipping far outstripped supply, as economies around the world began to emerge from the COVID-19 pandemic.
Following Russia’s invasion of Ukraine, wheat prices have jumped 50 percent, which is unsurprising given the two countries produce 30 percent of commodities such as wheat and maize.
This shock is being felt drastically in the Arab world, especially in Morocco, where the population consumes three times more imported cereal than the global average. Following the hardship of the pandemic in a country where 30 percent still work in the informal economy, the current dual shocks of rocketing energy and food prices should expedite plans for the creation of a welfare state.
Morocco has had a steady pandemic, leading Africa with its vaccination program and averting the public health catastrophe seen elsewhere. The success was seen by many as a change in gear for the old kingdom. Abdelmalek Alaoui of the Moroccan Institute for Strategic Intelligence called this the “Moroccan Moment” in a recent book.
Last year’s bumper harvest did suggest a relatively swift recovery. However, sustained border closures and rising unemployment have led to a review of the initially projected 5.3 percent economic growth. Last month, King Mohamed VI announced the allocation of $1 billion to combat the effects of drought in the country. The 64 percent deficit in rainfall necessitated the finance program to protect animal and plant capital and manage water shortages, as well as to finance market supply operations with wheat and fodder and reduce the financial burdens upon farmers.
Though seasonal rains have since fallen, their delay nevertheless will impact this year’s crop. The adverse effects of this delay have been exacerbated by the wider international pressure on food prices.
The announcement was the second such emergency injection of aid, following the 2020 Medical Assistance Regime, under which one out of every five households in Morocco received government aid for job loss due to the pandemic. Simultaneously, remittances from the Moroccan diaspora increased by 48 percent, reaching a record $5 billion in the first half of 2021. These emergency transfers have kept the economy afloat. Though necessary, they are not a substitute for a formal social welfare provision.
Investments in irrigation and economic diversification should go hand in hand with social care.
Zaid M. Belbagi
The previous government announced the gradual expansion of social welfare protection to all citizens within five years last August. The initial plans will focus on mandatory health insurance and family allowances followed by a second phase (2024-2025) to enlist citizens in pension funds and launch unemployment benefits. The plans are intended to improve living standards while concurrently curbing the informal economy.
In October, Prime Minister Aziz Akhannouch reaffirmed the need to “broaden the scope of social assistance programs through direct financial transfers instead of sporadic assistance.” This reassured the public. However, with rising prices, the billionaire Akhannouch’s ability to enact such plans that will greatly improve the lives of working people is being drawn into question.
The establishment of a welfare state is important given the pressures Morocco’s agrarian economy will face in coming years. Drought is expected to gradually increase in Morocco until 2050, due to the impact of a decrease in rainfall by 11 percent, and an increase in temperatures of 1.3 C according to the Ministry of Agriculture (which Akhannouch ran for over a decade). A decrease in the availability of irrigation water by as much as 25 percent will have a severe impact on the economy.
In a bid to boost the sector, Moroccan agriculture has focused on cash crops. Accounting for as much as 85 to 90 percent of Moroccan production, these are irrigation-heavy and have exposed Morocco’s growing food insecurity.
As smallholding farming has given way to a modern industrial sector that primarily produces food for export, Morocco has become more reliant on imported food. Given that agriculture accounts for 20-30 percent of gross domestic product and represents 43 percent of all employment and 78 percent of rural employment, the fact that 80 percent of arable land is located in arid areas and only 15 percent of the country’s land is irrigated is indicative of the pressure that climate change will have on the Moroccan economy.
As the UN Food and Agriculture Organization warned of the soaring cost of cereals and vegetable oils again this week, Morocco’s bold plans to introduce a welfare state are now all the more pertinent. Given the country’s reliance on agriculture, the fact that Morocco has suffered a drought every three years over the past few decades should be warning enough that investments in irrigation and economic diversification should go hand in hand with social care.
The vast majority of Moroccan farmers work fewer than five hectares, a quarter of the total land under cultivation. Large farms dominate fertile land. It is the impact of these on the environment which the government should focus on, as it is their success overseas which has impacted food security and the cost of living locally.
• Zaid M. Belbagi is a political commentator, and an adviser to private clients between London and the GCC.