Morocco’s finance ministry said on Tuesday that the country’s budget deficit would reach 5.6 percent of GDP by year-end, down from 6.2 percent in 2011, with ongoing subsidy reforms expected to continue the trend.
Excluding receipts from privatization, the budget gap will reach “around 6 percent” compared with 6.9 percent a month earlier, ministry officials told AFP.
Finance Minister Nizar Baraka had said in September that the government hoped to bring the deficit down to just five percent of GDP this year.
At a press conference in Rabat, the governor of the central bank, Abdellatif Jouahari, said that the compensation fund, which subsidizes fuel and other essential goods, would account for nearly 55 billion dirhams ($3.79 billion) of expenditure.
That compares to just four billion dirhams ($1 billion) 10 years ago, 32 billion dirhams ($8.71 billion) originally forecast in the 2012 budget, and an estimated 40 billion dirhams ($11 billion)for 2013.
Morocco’s Islamist-led coalition government has urgently sought to rein in an unaffordable subsidies system, amid deteriorating public finances and the lingering threat of social unrest linked to stubbornly high youth unemployment.
The budget deficit hit a record 6.1 percent of GDP last year, caused by rising international commodity prices and the growing subsidies bill, notably on food.
In a major step towards limiting spending on subsidies, it hiked petrol prices by 20 percent in June, and has vowed targeted handouts to compensate the more vulnerable sections of society.
“We expect that to begin in 2013, but nothing has been fixed yet in terms of the schedule,” Driss El-Azami, Morocco’s budget minister, told AFP.
“We need to reform the compensation fund. This is a difficult reform from a political point of view,” he added.