Magharebia (Washington DC)

13 November 2012

Morocco: Compensation Fund Strains Morocco Budget

Rabat — The kingdom's premier social safety net is in need of urgent changes to stabilise costs, according to officials.

Morocco's Compensation Fund is weighing heavily on the state budget, with officials warning urgent reforms are necessary.

"For the 2013-2016 period, if nothing is done, the burden of the compensation fund is forecast to reach possibly more than 200 billion dirhams compared with around 123 billion for the 2009/2011 period," according to official figures from the economy and finance ministry.

Forecasts for 2013 predict the cost of the Compensation Fund to be somewhere between 45.9 and 49.3 billion dirhams, based on a crude oil price of 105 and 110 dollars a barrel respectively.

Reforms to the compensation system are therefore central to the government's concerns and one of the top-priority areas requiring attention alongside pension reforms, stressed Economy and Finance Minister Nizar Baraka.

In remarks to Parliament on November 1st, he explained that the government has set a target of holding Compensation Fund expenditures to a sustainable level and, alongside that, managing to target the poorest members of the population by giving them direct conditional money transfers.

The government sees reforms as being progressive and working alongside other social programmes currently under way such as the National Human Development Initiative, the Tayssir education-based direct finance programme and the RAMED Medical Assistance Regime currently being rolled out.

Mohamed Najib Boulif, the minister-delegate for general affairs and governance, said that reforms need to be introduced in such a way that they do not diminish the purchasing power of the middle class or damage competitiveness in industry.

The work will start in 2013, but reforms will not be introduced until 2014.

MPs have spoken out against the delays in reforms to the fund. Abdellah Bouanou, an MP representing the Justice and Development Party, said that it was time to step up the pace if the government is to achieve its aims of targeting sectors of the population who should benefit from direct aid. He said there will then need to be an assessment of the impact of the policy on the public's daily lives.

Some in the middle class fear the reforms could weaken their purchasing power, according to political analyst Ahmed Azimi.

"The first price rises for fuel have already affected a number of commodities. The reforms will be progressive. We are expecting another rise in 2013, particularly for butane gas. But the government will be unable to announce this unpopular move until after the communal elections planned for June 2013, in order not to jeopardise its popularity," he explained.

Among the public, many believe that funding for the aid should be taken from the companies who benefit from subsidised products, rather than from the average man on the street by raising prices.

That was the view of El Khalifa Mehdi, a trader: "The cost of living is high enough already. People's incomes are stagnating. I can't see how the middle class could cope with what they call the compensation reforms."

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