April 6, 2013 / 1:31 PM / 5 years ago

Morocco cuts state investment, may reconsider subsidy reform

RABAT, April 6 (Reuters) - The Moroccan government has decided to cut its investment spending this year by 15 billion dirhams ($1.8 billion) to reduce pressure on state finances, the finance ministry said in a statement.

The government originally planned in its national budget for this year to invest 180 billion dirhams; in the 2012 budget, public investment was to be 188 billion dirhams.

“It is not austerity - I prefer to talk about rigour. We are just trying to optimise our spending,” finance minister Nizar Baraka told Reuters late on Friday.

The cuts will be proportional to the budget of each ministry, officials said without elaborating.

The country faces heavy financial pressures after it boosted spending to contain social discontent amid uprisings elsewhere in the Arab world, and as the euro zone debt crisis has hit its main source of trade and investment.

Before the announcement of the investment cut, the government had estimated its budget deficit would drop to 4.8 percent of gross domestic product in 2013 from 7.1 percent in 2012; the central bank had estimated a fall to 5.5 percent from 7.6 percent. The 15 billion dirham cut is equivalent to nearly 2 percent of GDP.

Morocco has also been considering how to save money through reforms to its system of subsidies for food and energy, starting this year. State subsidies on food and energy shot up to 53 billion dirhams in 2012.

However, official sources familiar with the matter told Reuters on Friday that because of the political sensitivity of the reform, the government might not proceed with it, at least immediately, but could instead raise taxes and cut investments.

“It’s too sensitive. The government would not touch the basic foodstuffs, or at least the first version of the reform would be discarded,” one official told Reuters, declining to be named.

Baraka told Reuters that subsidy reform wasn’t being dicarded, but that the government was taking a broad approach to addressing the deficit.

It was not clear whether any slowing of the subsidy reform would meet with the approval of the International Monetary Fund, which agreed last year to extend Morocco a $6.2 billion precautionary credit line and is believed to have made budget reforms a condition of the loan.

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