A Dangerous Game: 5% Deficit and Mounting Public Debt
I most certainly will devote a post underlying the inherent dangers of a large public debt on the Moroccan economy, especially when one considers it lives the closing moments of its expansionary cycle. But for now, I can only make the argument that a well-meaning government balks at serious fiscal policy schemes, and subsequently is running this country into uncharted and dangerous territories.
The various disclosed figures every now and then for the past week all point to a relatively high public borrowing requirements to match the unchanged total fiscal pressure – that stands at around 17.5% GDP and pay for the rather large increases in public spendings, in education, health and housing.
While the government has pursued a commendable agenda in boosting spending in these departments, I fear the hikes in public debt, and the high levels of deficit will soon put a stop to the committed level of spendings.
Le deuxième volet a trait aux politiques sociales. L’enseignement sera doté de 51 milliards de dirhams, la santé de 12 milliards de dirhams, la politique de l’Habitat de 3 milliards de dirhams. [...] Côté fiscalité, on n’enregistre aucun changement au niveau des taux déjà appliqués que ce soit au niveau de l’IS ou de la TVA.
That explains how the deficit first went from an initial projected 22 Billion deficit (around 3.2% GDP) to the 5% projected for 2012, that is 41 Billion – or almost 20 Bn of net additional spending. The previous Budget Bill projected 144Bn in fiscal receipts. The new deficit compounds the following:
* +4 Billion in education
* +2 Billion for Health
* +3 Billion for Housing
* +13 Billion for collective bargaining
I have some doubts about the last two items, given the high spending commitments relative to the budget allocated to departments in charge, and these might as well be part of the bombastic 188 Billion public investment target (most likely 64 Billion of Investment Budget) as for the other spending pledges, the 1Bn support scheme for private employment already exists -the net increase is a modest 360 Million dirham, up from the initial 640 Million. Moreover, the budget bill seems to provide for an additional 470 new public service jobs (up from the initial 25,734) the only new alternative -but not exclusive- policy to the Compensation Fund quagmire is a meagre 1Bn for the so-called solidarity fund – 50% less from what was talked about before the Election.
Overall, that means, ceteris paribus, the total Public Borrowings Requirements for 2012 will go up to *drum rolls* 66 Billion dirhams. For 2012, the government has to borrow that amount of money, which equates 1.6 receipts from the corporate tax, 2.3 receipts from the income tax, and most worryingly, one-fourth of total receipts for the Budget.