Moroccan Elections for the Clueless Vol.17
So after the released drafts, came the exhaustive manifestos, with their detailed -well, almost- figures on what these parties and coalitions have in store for the Moroccan electorate.
There is one sure thing: competing parties are more than eager to announce bombastic figures on spending commitments. It is not necessarily bad politics to play the “caring government” card, but unless the same numbers are buttressed with equally large projections of funding, then all these numbers are built out of thin air. The trouble is, it seems our political parties understood any precise proposals of tax increases could backfire, so they settle for vague pledges to close a loophole or institute a ‘special tax’ with no details of implementation or expected yield.
We shall have a look at the following economic manifestos: Alliance A8, PJD and USFP. These are the only ones with decent manifestos at the moment.
Alliance for Democracy [pdf] : so far the most profligate competitors with an astounding 130Bn spending increases per annum, for those programs with announced funding, that is. Their pledge to increase Education expenditure up to 30% of Budget spending is a 53Bn joke. It is hard to argue such increase endangers public finances, but the evidence is there: most of the money goes into pay-wage, and still our teachers and professors are badly-paid, and the standards of education are a shambles. I suspect the increase in Education expenditure will take on more bureaucracy, and as they say, throwing money at problems will not solve them.
The Alliance also pledges to cut further Corporate taxes to 25% from the present 30%. It means the expected 41Bn receipts will dwindle by some 2 to 3Bn. The mixture in tax cuts and spending increases, accrued to the self-constrained pledge not to go beyond 50% debt to GDP ratio means means they are expecting to solely rely on tax increases to pay for their pledges, and at the same time increase payment to bring the ratio around their pledged target – a 20 Bn increase in debt service alone, not to mention restrain on borrowing requirements. The basic budget accounting shows their net spending increase is more in the region of 100Bn, as far as programs with indicative costing are concerned. To stabilize deficit around 3%, the alliance will have to increase taxes to 80Bn. Spendings’ order of magnitude allows to gainsay the feasibility of their projected budgets, and thus sheds doubt over the supposed image of economic competence A8 leader and outgoing Finance Minister Salaheddine Mezouar is keen to push around.
PJD Manifesto [pdf]: PJD has taken a very courageous -but ultimately unrealistic stand on halving unemployment 2 basis points to the region of 7%. This means they pledge to create 240,000 additional job on top of the economy’s regular job creation process.
The 3% deficit pledge is a constraint on PJD’s ambitious 77Bn package spending commitments; there are 57Bn in public investments they need to pay for (as part of their pledge to double public investment) they are basically stating the government will take over pension funds and spend around 15 to 24Bn in pensions. A PJD-led government will have to levy 54 to 60Bn in taxes, as per their pledge not to exceed 3& budget deficit, and imposing 30% VAT on “luxury goods” is not going to make up for the required tax receipts.
These numbers do not account for other tax cuts they have promised in their manifesto, although it worth noting that any increase in spending needs to be matched with commensurate tax increase, unless PJD considers borrowing money domestically and abroad – a policy I would not trust they would carry out successfully: their manifesto points out domestic debt represents 55% of GDP (p.19 French language manifesto). Well, they have inflated (intentionally?) the number because it is actually total debt to GDP ratio; domestic ratio more around 38% (Bank Al Maghrib’s honour). They have fiddled figures so grossly, I really doubt they have what it takes to manage an economy.
USFP Manifesto [doc]: they have adopted what could well be the best course for a party looking on its sunset, i.e. no figures, or if there were any of those, they would not be enough to make a decent policy out of it.
It is a bit disappointing from a political party with a pretty decent economic team: Lahbib Malki and Fatallah Oualalou are both economics professors and former ministers (respectively Education and Finances) they have had the support of younger economists, and USFP has enough resources to put together a decent manifesto with precise economic measures. I guess all of them, for all their mastery of economics, have difficulties with advanced statistics. It is as though the manifesto is just a catalogue, a wish-list:
“adopter un taux d’intérêt faible pour le démarrage durant les premières années d’exploitation
des projets des PME.”
Which means USFP flushes down the toilet two decades of Central Banking independence and deregulation it has advocated, and now pushes for outright government credit rationing (with all the entailed adverse selection issues), also :
“● adoption d’un impôt exceptionnel de solidarité afin de faire face au déficit social chronique et pour une meilleure équité et un rééquilibre social objectif et garant de la stabilité et de la cohésion sociales,
● allègement du fardeau fiscal sur les revenus des classes moyennes, en particulier les revenus professionnels, en révisant les tranches actuelles de l’impôt sur le revenu et en ajoutant de nouvelles tranches sur la base du principe d’une plus grande contribution des revenus élevés,
● élargissement de l’assiette fiscale afin d’inclure de manière progressive les activités agricoles des grandes exploitations destinées à l’exportation sans toucher les petits agriculteurs.”
All interesting pledges, but as far as precise policy objectives go, these commitments hold no credibility, especially when the same party failed to implement these policies when Fathallah Oualalou was Finances Minister from 1997 to 2007. Ten years to end the amnesty on Agricultural taxes, a decade to levy the wealth tax, plenty of time to reform fiscal receipts.
Unless Istiqlal chips in with similar spending pledges, the main political parties and coalitions are not producing realistic costing of their economic programs for the next 5 years. And it is also worth point out no one took the trouble to address the debt issue. Whatever coalition gets into office, they will certainly have to cancel most of their spending pledges and focus on debt reduction ,not because they want to, but because IMF will ask them to do so. Pressure them, really. It is both relieving and saddening to find the ultimate evidence that every single member of the political establishment, elected or not, partisan or administrative, have failed in terms of economic competence. Those in office are being economical with the truth, those in opposition fuelling desperate hope for change, and those really in charge for failing to be fiscally responsible.