The Moorish Wanderer

5 Questions To Nizar Baraka

Posted in Dismal Economics, Moroccan Politics & Economics, Morocco, Read & Heard by Zouhair ABH on January 10, 2012

As a returning minister with a bigger portfolio, it is only right these questions need to be asked to our new Finances Minister. Beforehand, some congratulations are in order, this is a huge promotion indeed.

From the presentation document to the now defunct 2012 Budget Bill:

[…] L’Etat poursuit ses efforts de soutien des prix intérieurs des produits de base, en l’occurrence la farine nationale de blé tendre, le sucre et les produits pétroliers et ce, par le biais des mécanismes de la compensation qui représente pour le Budget Général une charge de plus en plus lourde.

En effet, les dépenses de l’Etat au titre de la compensation se sont élevées à près de 90 milliards de dirhams sur la période 2007- 2010. En 2011, la charge de compensation pourrait atteindre un montant de 45 milliards de dirhams en raison notamment du renchérissement des cours des produits pétroliers et du sucre brut sur le marché international. (Presentation Document, p.27)

Minister Baraka was the liaison minister to the Prime Minister for economic affairs; his portfolio included the Compensation Fund, and I can distinctly remember him on TV, September 2008, at Mustapha Alaoui’s “Hiwar” political show, boasting about his resolve to reform the fund. three years later, the 2011 Budget accounts for half of all compensation expenditure under El Fassi’s government. Way to go, minister, and there goes my first question:

Question 1: What will the minister do about the Compensation Fund?

How the Compensation Fund measures up to Budget figures

MAD 46 Bn, that’s about 6% of GDP, 15% of total Budget receipts and about 2/3 of all direct tax receipts.

The fact that the budget swelled from  46Bn is a sign of failure on behalf of Salaheddine Mezouar, Nizar Baraka and Abbas El Fassi, first because the 3% GDP limit every Budget bill constraints itself with holds no credibility, and second because the justification behind the discretionary increase was not about the fund’s official mission of stabilizing standards of living, it was a matter of “National Importance” all of a sudden.

Minister Baraka has made the Tayssir program his main theme as a junior minister. The 2012 Budget bill was supposed to provide funding for about 360,000 households (that is the bottom 10% income) will he extend that program to other income deciles as well, or is he planning to scrap the Compensation Fund altogether? It is worth pointing out that the Tayssir program has yielded no particular report, and no prerequisite targets have been set to assess its efficiency. We have yet to see some government figures on that.

Question 2: Will the minister make debt reduction a priority over spending commitments?

With an approximate 420Bn public debt as of last 2011, government resources will have to be directed to paying back the debt. I am not the one saying it, Bank Al Maghrib, the IMF and the minister’s own economic manifesto, all point out to debt reduction as a priority to be dealt with before any further increases in spendings are committed for the next legislature.

To that respect, the finance ministry can either reduce its expenditure and/or expand its fiscal receipts. Either ways, it is crucial to bring debt-to-GDP ratio from a likely 54% to BKAM’s 50% target. that 4% real cut -or MAD 30Bn or so will have to be financed somehow.

Perhaps more concerning for the minister is the credibility attached to Morocco’s foreign debt. True, it represents only 23% of total GDP -or 182Bn; so far, it matches up almost perfectly with Bank Al Maghrib’s net foreign reserves – but only just.

Question 3: Which average growth rate will the minister forecast for the next 5 years: 5% or 7%?

The senior partner in this government has pledged to insure an average 7% GDP growth throughout 2016. It seems they are bulking from it now, but that matters very little since Istiqlal party is firmly in charge of the finance ministry; by contrast, their manifesto pledged a modest but more realistic 5%. Given the fact that a 5% projection of growth for 2011 is now pretty much a reality, what will be the ministry’s prediction?

Question 4: Will the minister eliminate rent activities, end the moratorium on agricultural taxes and look through some 33Bn worth of tax loopholes, deductions and exemptions?

Rent-seeking activities are the blight of Morocco’s economy; unfortunately, institutional incentives are there to provide motive for economic agents: “grimas” are distributed on discretionary basis over closed sectors that would benefit to consumers and fiscal receipts alike if opened: transport, sand careers, high-seas fishery, these are billions of economic activities that not only fail to fall within fiscal scrutiny, but the private monopolies and oligopolies that constituted themselves have done so thanks to an over-regulatory legislation that protects them rather than consumers or enforce health and safety standards.

PJD officials claim that up to 1.5 basis points of growth are lost due to institutional corruption (on the basis of some reports). Is the minister going to lead the way and do the Head Of Government’s bidding on that respect?

Question 5: Any news about the 2Bn ‘Solidarity Fund’?

(No Comment)

Thank you.

7 Responses

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  1. hmida said, on January 10, 2012 at 22:36

    Je regrette d’avoir fait espagnol au lycée, d’avoir étudié l’italien pour des raisons professionnelles et lire le portugais presque sans problème mais de ne pas dominer l’anglais : j’aurais appris plein de trucs sur le Maroc en lisant tes posts destinés à l’élite de l’élite de ce pays!

    Que lastima!

    • Zouhair Baghough said, on January 11, 2012 at 16:04

      ما عليش آ سي حميدة، فرنسية أو إنجليزية راه بحال بحال، بجوجنا نخباويين

  2. فهد said, on January 11, 2012 at 14:49

    Do you know how much does the moroccan state pay as interest for the foreign debt ?

  3. فهد said, on January 11, 2012 at 15:08

    A third way to reduce the foreign debt is to cover it with a national debt. This will avoid a tax hike.
    At least, this will allow the state to pay less interests with foreign currencies.

    Is this something that has been tried elsewhere ?

    • Zouhair Baghough said, on January 11, 2012 at 16:02

      Hello,

      The treasury services on average 4.7Bn dirhams for interest.

      I don’t think the current state of liquidities in domestic debt markets can allow for it; in fact, there could be pressure on the budget to actually reduce its level of overall and domestic debt: BKAM is planning on keeping its main interest rates unchanged conditional on a reduction on yields and debt on behalf of public authorities.


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