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Morocco counts the costs of Arab Spring

Morocco counts the costs of Arab Spring

The Moroccan government spent billions to contain spread of protests. Now it must juggle rationalised spending and spurring growth as the need for foreign assistance looms for the 2012 budget.

September 8, 2011 3:16 by

…food and energy subsidies would fall 17 percent to 40 billion dirhams next year.

“The state will need more cash (in 2012) but receipts are not growing fast enough. The state will be forced to borrow from abroad or exert pressures on (interest) rates to borrow from the domestic market,” said a Casablanca-based banker.

The sale of state assets has been meeting growing opposition from political parties, depriving public investment of what has been a key source of funding.

Economist and former government minister Said Saidi said the state “can save billions by rationalising spending and adopting rigorous public affairs management and tackling tax evasion”.

“The state grants 24 billion dirhams of tax breaks annually without ever being sure of their benefit…Agriculture enjoys a tax amnesty, yet only 10 percent of its employees have social insurance,” he said.

Liz Martins, Middle East economist at HSBC, said Morocco’s budget deficit for 2011 was the highest relative to the economy since at least 2000.

She said Morocco would probably be able to avoid damage to its credit rating in the short to medium term, particularly if economic growth remained solid. But she added, “There are difficulties in the key export and tourism markets in Europe, high prices of oil and other commodities are not helping, and there is the threat of a global economic slowdown.”

The higher state sector wages will raise inflation in 2012 and boost demand, including demand for imported goods which could widen the trade deficit, said an official at Morocco’s planning authority.

“If tourism and remittances decline, this will hurt the accumulation of foreign reserves, therefore affecting the financing conditions of the economy,” the official added. (By Souhail Karam; Editing by Christian Lowe and Andrew Torchia)

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