The Roof is On Fire, Keep Calm and Carry On
The season of Budget Bill is upon us. and from what I can surmise, the planning staff at the Finances ministry is dead set on using the 5.5% growth for 2012-2016, and the target for reducing budget deficit to 3% of GDP by 2016 is maintained nonetheless.
I posted a short blog on how unreallistic these figures are, in the face of gloomy global, conjecture (even more gloomy as the IMF cut its global growth projection last week) pressure on Morocco’s foreign exchange reserves and the urge to cut the subsidies.
year| Deficit | Deficit| Deficit |(Bn dirhams)| % GDP |Reduction ----+------------+--------+--------- 2012| -49,6 | -6,1% | +4.9 2013| -45,1 | -5,3% | +4.7 2014| -40,7 | -4,5% | +4.2 2015| -35,8 | -3,7% | +5.1 2016| -29,9 | -2,9% | +5.8
The short communiqué on the MINEFI website points out projected growth for 2012 is 4.5% (close to IMF’s 4.3% prediction 3 months ago) and 4.8% deficit. There is a small difference between that figure and the 5.3% budget deficit for 2013 mentioned in the IMF report – which means there is margin for the government in its intent to implement this dramatic deficit reduction plan; It is dramatic, because a deficit-cutting plan from 6.1% to 4.8% means there are 11.03Bn net cuts in the budget – which in turns means larger revenues and/or expenses adjustments.
And here is the clincher: There are going to be 24,000 new openings in public service payroll – and since most of these are going into relatively high-paying jobs – in fact, they are most likely to be centered around the median entry public service salary (about 7,000 a month) 2Bn in additional expenses.
So there it is: a tax increase is unavoidable -in fact, desirable, provided discretionary loopholes are closed, though it is not certain Mr Benkirane has the guts to take on the special interests benefitting from the status-quo, and so are the cuts to subsidies.
PS: IMF seems to have considerably upgraded Morocco’s outlook on GDP growth to… 5.5% (up from the previous 4.3%) strange.