The government will add 15 billion dirhams ($1.8 billion) to the 17 billion dirhams allocated by the 2011 budget for the government’s subsidy fund called Caisse de Compensation, the official MAP news agency said.
The Finance Ministry declined to immediately say how the government intends to fund this increase in expenditure.
Morocco’s budget deficit by the end of November 2010 hit the 4 percent target fixed by the government for the whole of last year after state subsidies rose 126 percent to 25.9 billion dirhams.
The Moroccan government had fixed a four percent of GDP deficit target for 2010 and 3.5 percent for 2011. Economic growth had been projected to reach 4 percent in 2010 and 5 percent in 2011.
Based on Reuters calculations, this means that at 32 billion dirhams the Caisse de Compensation alone would cost 4 percent of the country’s GDP in 2011, if the 5 percent growth target is met.
Earlier this month, the Planning Authority (HCP) said the country’s Gross Domestic Product (GDP) looked set to post growth of 3.3 percent. The finance ministry puts the country’s 2009 GDP at 732.3 billion dirhams.
Morocco heavily subsidises staples, such as cooking gas, sugar and flour. Last month, the government promised to keep staples affordable at any price even if a surge in global prices of food and oil have a severe impact on its public finances this year. [ID:nLDE70O1X5]
The statement followed a wave of street protests that rocked Algeria, Egypt and Yemen and which was inspired by the toppling of Tunisia’s president after a popular revolt the same month.
Morocco’s 2011 budget was based on an oil price of $75, while Brent crude oil rose on Tuesday to near $104. Official data also showed the country’s soft wheat stocks fell to cover a little over 60 days of needs, their lowest in several months, which may pressure the government to resume international imports at large scale.
Analysts say Morocco’s subsidies system could be enhanced by making sure it benefits those who need it most.
Morocco, a country of 32.6 million, has no oil or gas of its own and is among the world’s top 10 wheat importers. Prices of bread and gas would at least double if the state was to abandon the subsidies system completely.
Dozens of Moroccans were shot dead by security in 1981 after a popular revolt to protest an increase in bread prices, the bloodiest street revolt in the country’s modern history. (Editing by Ron Askew)
