Morocco delays subsidy cuts until after Ramadan

"We will launch the automatic price adjustment after Ramadan," Finance Minister Nizar Baraka told Reuters

Morocco delays subsidy cuts until after Ramadan

World Bulletin / News Desk

Morocco will delay a planned deregulation of prices for some subsidized products until after Ramadan following controversy over its announcement of the move before the Muslim fasting month when millions of Moroccans spend heavily.

The government, under pressure from the International Monetary Fund, is seeking to cut back on subsidies that burned up 53.36 billion dirhams of public money in 2012 or 6.4 pct of Morocco's GDP.

But the reforms also mean pain for households used to subsidized oil, gas, sugar and other staple goods.

"We will launch the automatic price adjustment after Ramadan," Finance Minister Nizar Baraka told Reuters. "We will announce the exact day after the sacred month taking into consideration the commodity prices in the international markets."

General Affairs and Governance Minister Mohamed Najib Boulif said last week that the government would start automatic price adjustment within weeks for fuel - except cooking gas - and sugar.

The government expects the shift to cut spending on subsidies by 20 percent, to 42 billion dirhams ($5 billion) or less. That is within the limit fixed by the 2013 budget, which is based on an oil price of $105.

Boulif noted that if oil prices were lower than $105 then Moroccans would wind up paying less than if the subsidy scheme had been left in place.

"The adjustment will be in both directions. When (oil) prices are less than $105, that will let Moroccans consider that it is not necessarily a bad thing," he argued last week.

The government, however, may also set a different pricing regime of diesel fuel to protect the transportation sector and avoid a snowball effect on prices.

"We are considering how to set a different pricing regime for diesel used in the transport of people and goods, but it is in discussions and not yet decided," Transport Minister Abdelaziz Rebbah told Reuters earlier this week.

That may sharply reduce the savings for the government as the transport sector burns up around 65 percent of the national consumption of oil, according to ministry figures.

A junior party is threathening to quit the governing coalition unless Prime Minister Abdelilah Benkirane moderated plans for the sweeping cuts. Benkirane, backed by the IMF to the tune of $6.2 billion under a precautionary credit line agreed last year, insists the reforms will go ahead. 

Güncelleme Tarihi: 03 Temmuz 2013, 17:45