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The Macroeconomic Impacts of Reforming Subsidy Policy in Morocco

Journal: International Journal of Science and Research (IJSR) (Vol.7, No. 11)

Publication Date:

Authors : ; ;

Page : 1934-1937

Keywords : socio-economic impact; subsidy removal; budgetary balance;

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The subsidy system in morocco has been subject to several structural reforms the last couple of years, aiming to stop the huge budgetary overruns that started accumulating since 2009, reaching their highest level in 2012. The budgets allocated to the compensation fund exceeded the budgets allocated to public investments of the same year, an abnormal structural flaw that was weighing heavily on public finances. This was obviously due to the structural dysfunctions of the subsidy policy in the country, as the subsidized staple products were not exclusively available to the deprived social classes but in the reach of all social classes combined, in addition to industrial companies that use these products as an input in their goods or services. The efficacy of such a system was not optimal as the targeted groups of the population were not the ones benefiting the most from the subsidized products, as their consumption levels are much lower compared to high income social classes and large industrial firms. This paradox triggered a number of consecutive interventions to redress the subsidy policy. These crucial changes started in September 16th 2013, as the partial indexation system was implemented, an action that was the first step towards the complete liberalization of petroleum products prices such as fuel and gasoline in February 2014, then diesel in January 1st 2015. The impact of these reforms was remarkable on a budgetary level for the State, as all overruns stopped and arrears were cleared by 2015. Compensation expenditures reached 56.6 Billion/MAD in 2012 and moved down to 13.8 Billion/MAD in 2015. The government successfully removed these subsidies with perfect timing and conjuncture, because of the historical price drops witnessed, as the average annual crude oil prices went from 111.63 USD/Barrel in 2012 to 43.55 USD/Barrel in 2016. This allowed the State to unburden the public budget and avoid all social tensions caused by the negative impacts the subsidy removal would have, if it had happened in a different scenario. The downward tendency of the international market prices remains unchanged and therefore, all financial indicators are positive and the budgetary savings are still improving. On a social level, we can only cautiously observe the changes on international markets and hope for a durable stability in terms of price fluctuations, as no accompanying measures to support the disadvantaged social classes were implemented. A study was carried out by the HCP to estimate the impacts of a probable future price increase of liquid petroleum products, which results well showcase shortly afterwards.

Last modified: 2021-06-28 20:21:18