The Evolution of the Subsidy System in Morocco

The reform of the subsidy policy in Morocco is in a constant evolution due to multiple and crucial governmental decisions taken in the last decade. The system was (and still is) gradually heading towards the liberalization of the prices of highly consumed products such as sugar, liquid petroleum products, butane gas and national soft wheat flour. However, the system is playing a very important role in mitigating the negative impacts of the sudden and brutal changes that occur daily on international markets, on national consumers, especially those belonging to low-income social classes. During the last few years, global crises were constantly emerging and causing a continuously increased inflation for most staple goods, especially liquid petroleum products (Diesel, gasoline, and fuel). This had severe repercussions on public finances, causing for the first time in 2009, a deficit of 6.2 Billion/MAD. A couple of years later in 2012, a year that was a significant stop in the policy changing process, the deficit reached alarming levels and reopened a serious debate about the accuracy of the compensation system. The compensation expenditures were a heavy burden on public finances throughout the years. An issue that the State was dealing with by incessantly trying to find new alternative solutions for the unexpected and immeasurable charges that it inevitably faced everytime a price jump took place on the international markets. The heavier the burden got, the harsher critics spoke of a subsidy system that was initially meant to benefit low-income citizens, by protecting their purchasing power from the instability and price fluctuations of basic products. Thus, the public authorities were forced to adjust and rework the whole approach of how subsidies were distributed, as the targeted social classes barely profited from it, while big companies kept on growing and expanding consumption levels, causing real damage to the efficiency of the compensation fund. Many scenarios were being discussed such as whether the compensation fund should be maintained, reformed or totally removed. This debate kept intensifying until 2013, when revolutionary changes and reforms were adopted for the first time, through the implementation of the partial indexation system. However, before detailing the chronological reforms that marked this rupture in the states policy, we will first progressively examine the many aspects of the compensation system in Morocco.