The Moorish Wanderer

Smoke Screen: A U-Turn ahead

Posted in Dismal Economics, Flash News, Moroccan Politics & Economics, Morocco, Tiny bit of Politics by Zouhair ABH on December 8, 2011

El Himma and Znagui appointed advisers to the King, some murky constitutional points have been discussed with the appointment of ambassadors, but not enough attention has been paid to an interview given to Al Massae newspaper by Najib Boulif – quite interesting a read for anyone interested to know what the PJD-led government has in store for taxpayers; and it is not pretty. He was a brilliant debater on public finances issues, and he would do an excellent government official, at the Finance Ministry perhaps.

To his credit, Prof. Boulif (a PJD leader and prominent Parliamentary member) recognized quite candidly that his party’s manifesto will have to be adjusted:

 من المفيد التقديم لهذا الحوار ببعض العموميات، المتعلقة أساسا بكون البرنامج الانتخابي للعدالة والتنمية هو برنامج تقدمنا به للحصول على أصوات الناخبين، وهذا البرنامج الآن من المفروض أن يطرأ عليه بعض التغيير لملاءمته مع برامج الأحزاب الحليفة التي ستشكل الحكومة المقبلة، بمعنى أن برنامجا جديدا سيخرج للوجود، وسيكون أرضية عملية للتصريح الحكومي المقبل.

True. Insofar the macroeconomic performances are quite uncorrelated with the possible permutations in government coalitions, GDP growth projections are not subject to what PJD or Istiqlal (or MP) have promised: 7% as promised by PJD, turned out to be not an average, but, in his own words, “7% growth is a target set by [our] party for the last year in the next legislature i.e. 2016”. Their pledge to increase GNI by 40% however,has flown out of the window now that PJD has reneged on the projections of an average 7% growth; the relationship between GNI and GDP is so obvious that whatever differences in value that might arise on a 5-years period are negligible enough to concentrate on the essential link between high GDP growth and high GNI (even per capita)

GNI and GDP go hand in hand; for PJD to increase GNI, they need to allow GDP to grow at commensurate proportions

So his party’s pledge to increase GNI per capita 40% by 2016 is severely handicapped once he admits the 7% GDP growth is not an average for the next 5 years, but rather an upper bound for what is realistically more around 5%.

More concerning however, is what seems to be a U-turn on the 3% deficit PJD said they would abide by; Boulif walked back on that pledge by saying that it was not ‘sacred’ and would rank second to more pressing targets:

– ما هي الآليات التي ستعتمدون عليها للتحكم في الميزانية في حدود 3 في المائة؟

> من الناحية النظرية، ليست نسبة 3 في المائة أمرا «مقدسا»، ولست من المدافعين عن الأرثدوكسية المالية في هذا الجانب. فإذا كنتم تقصدون نسبة العجز في سؤالكم، فعلى المغاربة أن يعرفوا أن الخصاص الاجتماعي كبير في البلد، وأنه في هذه السنوات المقبلة يجب أن نرفع من مستوى البنيات التحتية الاجتماعية الضرورية، سواء على صعيد الصحة أو المرافق الاجتماعية أو مستوى عيش السكان، إضافة إلى ضرورة فتح أوراش تنموية كبيرة تكون قاطرة للانبثاق الاقتصادي الطموح

Sure, Morocco needs far-reaching structural reforms, but by belittling their commitment to the 3% limit, PJD admits implicitly it will not implement all of the reforms it vows to carry out in their manifesto: rather, they prefer to be a short-term nanny state, and not take on the big subsidies and generous exemptions every budget has in store for real estate developers, big farmers and others enjoying rent-like activities or near-monopolies. It is sad indeed that Rep. Boulif did not put forward any scheduled plan to reform the compensation fund in this interview; he was evasive enough about the outgoing government’s aborted project to set up a 2Bn ‘solidarity fund’ (a fig leaf for the proposed amount really) but did not provide quantitative targets in terms of tax reforms or levied receipts per tax class. I’d prefer not to mention the public debt, first because the re-elected member of parliament for Tangiers didn’t mention it, and second because it is a ticking time-bomb ready to blow in less than 5 years’ time if the next finance minister doesn’t do something about it.

The same evasiveness was displayed when asked about how the next government will raise Morocco’s competitiveness: though his answers were indeed aimed at improving Morocco’s performances in terms of balance trade and payment, but for all the rhetoric about  “improving the domestic economy”, there is a lack of clear policy about how to improve productivity -this, I believe, is what Rep. Boulif might have had in mind- other than provide small businesses with a preferential status for public procurement; and somehow, this failure to put forward precise policies to increase productivity sheds a great deal of doubt on how the next government will get growth rate to the level of 7% – without triggering inflation significantly above BAM’s target rate of 2%.

In addition to what remains very clumsy explanations of what they should do, PJD’s Economist-in-Chief did not care to provide more details about what they will do for middle classes; the question was asked, and here’s his reply:

> لقد اعتبرنا الطبقة المتوسطة ضمان الاستقرار والنمو والتنمية بالمغرب، ولتطويرها اعتمدنا عدة مقاربات، منها ما هو مباشر ومنها ما هو غير مباشر. وبالتالي سنعمد إلى مراجعة فعالة لمنظومة الأجور وفق نظام الأجر العادل والضامن للحد الأدنى للعيش الكريم (الرفع من الحد الأدنى للأجور والمعاشات، السلم المتحرك، التأمين على البطالة)، وربط التعويض على المعاش المترتب عن حوادث الشغل في الوظيفة العمومية بالأجرة والأقدمية عوض الاعتماد على نظام 100 نقطة الأولى من الرقم الاستدلالي، وذلك على غرار ما هو معمول به في القطاع الخاص. كما سنرفق هذه الإجراءات بتنزيل مقتضيات حماية المستهلك ودعم الجمعيات العاملة في القطاع، وتطوير برامج الحماية الاجتماعية في ظل تنامي الفقر والهشاشة، وإنشاء بيت الزكاة وإصدار قانون منظم له مع إخضاعه للمحاسبة العمومية، وضبط وسائل إعادة التوزيع من الفوارق الاجتماعية، وإرساء نظام تدبير عقلاني للأوقاف، وتعزيز دورها في نظام التضامن ورفع دور الرقابة البرلمانية، مع إصلاح صندوق المقاصة بتطوير نظام الاستفادة منه ليقتصر على الفئات المستحقة، وتعزيز موارده بضرائب تضامنية…

And he is right in that a strong and large middle class base is the best way to insure stability and a certain equality in income distribution; but in his view however, achievement of such goal is restricted only to those working in the public sector -presumably, a USFP-turned PJD constituency- he seeks to defend and protect their relatively stable and safe income; but again, he fails to provide comprehensive policies other than placebos: on consumer protection, social security and other equally important issues, though these rank secondary to the crux matter of increase median incomes in real terms, instead of letting them slip behind GNI growth and the more affluent.

There’s a lot to go on about, but my opinion of that interview is that PJD has had quite a harsh reality check. The petulant Head Of Government-elect Abdelilah Benkirane will have a hard time trying to boost the economy as his party experts already go on to tell the press that they have no magic wand; For those first-time PJD voters in the business community, I am afraid the disillusion will be somewhat painful: the new government is as unlikely to take on tough structural reform as their predecessors failed or refused to do so. The first test, as Rep. Boulif put it, is the compensation fund reform: if nothing is done by the end of 2012, then whatever PJD will say and spin about its economic message will be unable to cover their utter incompetence on economic issues.

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