Morocco to resume subsidies reform when conditions permit- minister

(Updates with additional comments)

By Ahmed Eljechtimi

MARRAKECH (Reuters) -Morocco’s government will resume subsidy cuts when conditions in the international market permit, the minister in charge of the budget said.

Morocco cut subsidies on fuel in 2015 – a move praised by the IMF – but continues to control the prices of soft wheat, cooking gas and sugar.

It has launched a national register to identify households in need of direct cash handouts as a prelude to scrapping the system.

“Morocco will resume the reform depending on conditions in the international market,” Lekjaa said.

The subsidies reform “is always a priority,” but “the geopolitical context does not of,fer visibility over prices” Fouzi Lekjaa told Reuters, on the sidelines of the IMF-World Bank meetings in Marrakech.

Morocco’s subsidies spending up to July stood at 17 billion dirhams ($ 1.7 bln), down 32% from last year, when the annual cost of backing prices soared to 42 billion dirhams ($4bln) after higher soft wheat and butane gas prices.

The government expects to further cut the fiscal deficit to 4% in 2024 from 4.5% expected this year, said Lekjaa.

“Safeguarding macroeconomic balances is a strategic public finance goal,” he said, almost one month after an earthquake hit the Atlas mountains killing nearly 3,000 people and impacting the lives of 2.8 million.

The post-earthquake reconstruction effort “would impact growth positively,” he said.

The main quake-affected economic activity was subsistence farming, which will be offset by other sectors like tourism, he said.

In its 2024 draft budget, the government forecasts the economy to grow 3.7% after 3.4% expected this year.

The country had announced a five-year reconstruction plan worth $12 billion that also targets the upgrade of infrastructure.

Morocco would not resort to debt but rather to the budgets of different ministerial departments, to a special relief fund and to international cooperation to finance quake reconstruction, he said.

This year, the IMF offered Morocco a flexible credit line of $5 billion and a climate resilience loan of $1.3 billion.

Morocco is on track to regain its investment grade following its exit of the “grey list” of countries under special scrutiny last year, Lekjaa said.

(Reporting by Ahmed Eljechtimi; Editing by Chizu Nomiyama)