5 Questions to Mr Mezouar
RNI official twitter feed posted a couple of days ago:
Le parti RNI vous remercie pour vos feedback sur FB,Twitter & Youtube, nous reviendrons vers vous semaine prochaine avec une vidéo de réponse.
So be it. I have some questions to ask to the Minister and RNI leader, especially on his record on government fiscal policy and management. Some aspects of the economy eluding his purview, and my questions shall concentrate on three broad areas: debt, public deficit and government budget policy itself.
Question 1: Total Debt & Its sustainability
According to his own ministry’s figure, the current stock of public debt for 2011 Q3 stands at MAD 397,976 Bn, that is 51% of GDP. The number in itself is not meaningful unless put in its context;
Ever since Mr Mezouar took office after the 2007 elections, the average annual growth of public growth was 2.23%, i.e. a 9% increase over his tenure, of which the 2010-2011 contributed about 10.76%, thus taking us back to 2005 levels in public borrowings.
Now, the question is: in the event he is returning to office, as a finance minister or otherwise, will he continue increasing public debt stock, or will he engage policies in deflating it and increasing debt service to bring the debt ratio below of 50.8% for 2016? ‘s target
The issue of debt is quite important to the Moroccan taxpayers: first, because an increase in debt stock is a burden on future generations, especially when there is no investment with commensurate yields to benefit those generations. Second, because the current projections for foreign-held debt are on the upward trend, thus putting a strain on our foreign reserves, and cast doubts over the economy’s solvency. The question of foreign debt is even more important, considering the long-term projections on the global economy, there is great doubt we can refinance ourselves at the same favourable conditions we have enjoyed on September 2010.
Question 2: Budget Cuts & Expenses containment
The Minister’s streak for orthodox economics showed on various policies discussed in the next scheduled questions; but under the minister’s watch, government spendings doubled over the last 4 years (while GDP grew 21% over the same period) the budget’s spendings on compensation tripled from MAD 16Bn to 48Bn.
Now, it is understood these accelerated increases in expenses mean some changes have to be enacted within the budget structure. He had a meeting with the IMF on July this year, and committed to some budget cuts, defined as 10% of non-essential expenditures across all departments. Now, assuming he remains in office, will he pledge not to cut expenses blindly across departments, and if he is set on doing so, will he pledge not to cut expenditure from Education, Health and Law & Order, as well as commit to increases in real terms?
The cuts are necessary because of the swelling budget, especially on the compensation fund; but a uniform cut implied in this official document will inevitably hurt those departments and front-line services critical to the Moroccan citizens, and the minister would do well not to lock himself in ideological entrenchments on that matter.
Question 3: Potential Receipts and Fiscal Policy
Ever since he took office at the Finance ministry, Mr Mezouar has been cutting taxes across the board; but his 2008 tax reforms on income by lowering the marginal tax from 42% to 38% has been ideologically motivated; furthermore, under his watch, the tax loopholes and exemptions increased 40% from 21Bn to 29Bn, even though deficit has been steadily deepening from the one time he managed to balance the budget in 2007 and 2008, from a MAD 3Bn surplus to a 35Bn deficit in 2010.
Following the income distribution and income tax contribution per decile, it seems this government’s policy is not to allow the middle class to flourish and expand; indeed, they seem to be paying the highest effective rates; that was the case before the 2008 tax code reform, it is even more so when the marginal rate was lowered. In these times of economic hardship and government tight budget management, wouldn’t be fair and straightforward a policy to increase taxes on the upper 10% of the population? My question on that topic is twofold: first, are there obvious benefits to his income tax cut, if there are, can he produce compelling evidence about it? and second, will he favour tax increases on the wealthy instead of borrowing to make up for the shortfall in receipts?
Question 4: Compensation Fund and Fairness
The compensation fund stands now at MAD 48Bn. The idea behind this fund is to subsidy food and other strategic goods, so as to preserve the working classes’ purchasing power and standards of living from deteriorating, especially with volatile commodity prices on the world market. But unfortunately, it has been pointed out that these subsidies benefit the rich. The argument is rather simple to buttress this claim: these subsidies are indiscriminate of income, so they have to benefit those with higher consumption levels in absolute value: the top 10% outspend the bottom 10% at a ratio of 3 to 1.Their annual spending in butter, edible oil and other subsidized goods are equally higher, and thus capture more subsidies.
Consider edible oil, perhaps the most recognized candidate good for subsidy: the bottom 10% tend to consume, on average MAD 600, while the top 10% spend 2,000. Since the subsidy is uniform across the board, it is clear the top 10% benefit more, to the tune of MAD 8,000 per household (assuming the real price is subsidized at 80%) on their annual consumption of edible oil.
My question is as follows: will he consider seriously the phasing out of the compensation fund, and establish gradually a serious program in using 3-months futures and options to buy commodities at moderate prices on the global commodity markets, and will he consider (again, seriously) the study of food-stamps-like programs so as to target those who need these subsidies?
Question 5: Open Data and Parliamentary Oversight
As a likely head of government, Mr Mezouar will have to follow the budget-making process on another level with broader responsibilities on setting the tone for many policies encompassed in the budget. Since we are now officially operating under a (supposedly) true constitutional monarchy setting, he will have to work directly with both the majority and minority caucuses to get the votes on his budgets. On the other hand, those of us who care about these issues would like to have free and easy access to the data needed to put the budget together; My last question is twofold: first, would he consider setting up an open data program describing in detail the contributions of each class of taxpayer (whether individual or business) to the various classes of receipts, and would he provide parliamentary caucuses with actual power over shaping the budget, instead of just allowing them to attach modest amendments?
These Tweeps, Facebookers and Bloggers you have referred to in your video have asnwered your call, Mr Mezouar: I am asking these questions; I’d like some answers on them.