Mohamed Boussaïd, Minister of Economy and Finance: Interview

Interview: Mohamed Boussaïd

What kind of impact have recent cuts in energy and food subsidies had on the country’s economy?

MOHAMED BOUSSAÏD: Subsidies have exposed the state budget to the volatility of global markets without resulting in any effective change in income distribution or improvements in economic competitiveness. With the increase in prices over the past few years, the cost of this system has become untenable and has started to pose a threat to the sustainability of our entire macroeconomic framework. Therefore, the government has reformed the compensation system, reintroducing the partial indexation of the intern prices of diesel, gasoline and industrial fuel in September 2013.

This first measure brought the burden of subsidy compensation in the state budget from 6.6% in 2012 to 4.8% in 2013. The government ended subsidies for gasoline and fuel oil in 2014 and reduced the unit subsidy on diesel. It also proceeded to end subsidies on industrial fuel granted to the National Office for Electricity and Water. Thanks to this second wave of measures, the annual burden for compensation decreased yet again, to reach 3.6% of GDP in 2014, representing a reduction of 1.2% of GDP compared to 2013. This year, the government made an agreement with oil companies that should be concluded before the end of the year that will result in a total liberalisation of prices.

What measures can the government take to further reduce the current budget deficit?

BOUSSAÏD: One of the government’s priorities is to pursue a progressive recovery while balancing the budget. For example, the Finance Law 2015 has predicted a budget deficit amounting to 4.3% of GDP. To bring that level down, we will need to implement a number of additional measures that help to further optimise expenses and strengthen revenue.

In terms of spending, the main actions will consist of reducing administrative costs, controlling payroll and improving the delivery of public investment projects, such as through private-public partnerships. The tax administration will fight against fraud and tax evasion, as well as help to integrate the informal sector, while streamlining and rationalising tax exemptions.

In addition to the acceleration of structural and sectoral reforms, the Finance Law 2015 has provided measures to stimulate productive investment and support local businesses, including small and medium-sized enterprises, and micro-enterprises. The government has also laid out plans to improve the management of public finances, notably through the introduction of multi-year programming, result-oriented management and the imposition of a fiscal golden rule to limit debt.

To what extent has the fiscal amnesty programme had a positive impact on state finances?

BOUSSAÏD:The fiscal amnesty programme was included in the Finance Law 2014 to give all individuals of Moroccan nationality the opportunity to declare their assets and cash abroad if it was found to be in breach of foreign exchange regulations and tax laws. Some 18,973 declarations, totalling Dh27.8bn (€3.02bn), had been made by December 31, 2014, including Dh9.6bn (€1.04bn) in real property, Dh9.9bn (€1.08bn) in financial assets and Dh8.4bn (€913.9m) in liquid assets. As far as the revenues for the state are concerned, the total contribution in terms of taxes as a result of the full disclosure for assets and cash held abroad was equivalent to Dh2.3bn (€250.2m), an amount that will be allocated to the Social Cohesion Fund.

In addition to its impact on the government’s finances, the repatriated assets – which are equal to about a third of the new declarations, or Dh8.4m (€913.9m) – will feed the exchange reserves of Moroccan banks, in turn allowing them to mobilise additional funds that can then be injected into the national economy in the form of credits for local businesses. By listing and disclosing their assets and cash held abroad, applicable taxpayers are now in full legal compliance with the planned regulatory changes. As a consequence, these taxpayers can be fully integrated into the common tax regulations.