* Technical preparations complete
* But political decision still needs to be taken
* Cash payments to poorest would replace current system
* IMF has been pressing for the reform
* But inflation could rise sharply
By Aziz El Yaakoubi
RABAT, Jan 5 Morocco is prepared to start
reforming its expensive system of subsidies for food and energy
in June if a political decision to do so is taken, the minister
in charge of the issue said.
State subsidies on food and energy shot up to 53 billion
dirhams ($6.25 billion) in 2012 - 15 percent of total public
spending - from 48.8 billion in 2011 and 29.8 billion in 2010,
as the government spent heavily to ensure social peace in the
wake of the Arab Spring uprisings elsewhere in the region.
In a step supported by the International Monetary Fund, the
government now aims to repair its finances by reducing the
subsidies and shifting the focus of spending to the poorest
The reform is politically sensitive in a country which saw
street protests demanding democracy and better economic
management in the wake of the Arab Spring.
The protests faded after the king introduced constitutional
limits to his powers and allowed an Islamist party to form a
cabinet after elections. The monarchy still plays a key role in
decisions on major issues.
"Technically, the reform of the subsidies system is quite
ready," general affairs and governance minister Mohamed Najib
Boulif said in a statement carried by the state news agency late
"Once talks are concluded and the political decision is
taken, it will be launched," he added.
Morocco plans to replace the current subsidy system with
monthly cash payments of 1,000 dirhams to as many as 2 million
of the most needy families; if the reform goes ahead in full,
this could reduce the annual bill to 24 billion dirhams.
Boulif said the reform would take around four years and
could in itself eventually raise inflation, now officially
running below 2 percent, to 7 percent.
"The risk of the reform is the impoverishment of the middle
class," finance minister Nizar Baraka has said in a
Last August, the IMF approved a $6.2 billion precautionary
line of credit for Morocco over two years while urging action to
reform the subsidy system, although it did not formally tie the
reform to the aid.
The cash-strapped country raised $1.5 billion with an
international bond issue in early December, which lifted its
foreign currency reserves to 146 billion dirhams - but they only
cover about four months of import needs, which economists say is
an uncomfortably low level.
Rabat aims to cut the state budget deficit to 4.8 percent of
gross domestic product in 2013 from an estimated 6.0 percent
last year. It is projecting GDP growth of 4.5 percent this year,
after 3.4 percent in 2012.