Moroccan government develops strategy to tackle rising prices

03/06/2008

In response to rising prices across a number of goods and materials, the Moroccan government has announced a new initiative to help consumers and stabilise the budget.

By Sarah Touahri for Magharebia in Rabat – 03/06/08

[Sarah Touahri] Morocco's Minister Delegate for General and Economic Affairs, Nizar Baraka, said his ministry is working to restructure government subsidies in order to address rising prices for staple goods.

Faced with a steep hike in prices of essential products and basic materials, the Moroccan government has worked out a global structural strategy aimed at controlling the compensation fund budget and introducing economic efficiency and fairness into the distribution of subsidies.

"Morocco will maintain compensation whilst many other countries have raised prices by around 40%, so the compensation fund budget will rise to 30 billion dirhams rather than the 20 planned in the budget," said Nizar Baraka, Minister Delegate for General and Economic Affairs, addressing Parliament on Wednesday (May 28th).

Baraka described how his ministry identified failings in the fund related to an unchecked budget, the growing dependency on world markets and the many actors involved.

"The high number of intermediaries is a real problem," he said. "For example, wheat – which is subsidised by the state at 1.43 dirhams/kg to reach the consumer at 2 dirhams/kg – can be found in markets at more than 2.50 dirhams/kg."

To make matters worse, the wealthiest 20% in society enjoy 75% of the subsidies, while the poorest 20% receive just 1%.

Another important issue is the cost of butane gas. This commodity was initially subsidised to benefit households, but it is also used in the manufacturing sector. Growth in consumption has risen from 5% annually in 1995 to 9% over recent years.

A series of measures is now planned to deal with these failings, particularly the development of alternative energy sources and smarter energy consumption (energy-saving bulbs, solar energy, energy audits for manufacturing and agricultural facilities).

As part of the new energy strategy, a revised price structure will apply to customers with high electricity consumption rates during times of peak demand.

In addition, there are plans to revise the breakdown of subsidised commodities. Ministerial committees are in the process of examining this subject to get costs under control, particularly where profit margins and transport costs are concerned, so that the final price can be set more precisely.

Studies are currently under way to set out a new pricing system for oil products, considering the margin for oil refining which will be adopted by Moroccan oil refining company SAMIR from next year. This new system will emphasise reducing profit margins at the local level.

According to the government, price controls will be backed up by guaranteeing that national prices are clearly published, particularly where sugar and flour are concerned, to avoid speculation. According to Minister Baraka, this measure will be applied over the next few months, by agreement with professionals.

Baraka also indicated that the government also wants to reduce economic dependency on international markets by promoting vital sectors locally. This relates in particular to helping domestic wheat production cover a larger share of national consumption and improving the negotiating ability of professional organisations in the agriculture sector.

Where sugar is concerned, a contractual programme has been drawn up with professionals to cover 58% of national needs instead of the current 38%, by increasing the area given over to sugar cane production and improving production resources.