Interview: Abdel-Ilah Benkiran

How have oil prices affected the subsidy reforms?

ABDEL-LLAH BENKIRAN: At the start of this government’s term, Morocco’s compensation fund amounted to Dh57bn (€5bn), or nearly 26% of the national budget  a considerable amount for a country with revenues of less than Dh220bn (€19.6bn). We were firmly convinced that this situation is unsustainable and had no guarantee that the fund’s expenses were not going to increase even more. Thus, we chose a progressive approach, adjusting hydrocarbons prices upwards before adopting a partial indexation system and at last choosing to let the prices truly reflecting the real costs.

Diesel subsidies went through a progressive reduction in 2014, from Dh2.6 (€0.23) per litre in January to Dh0.8 (€0.07) in December. The public opinion has favourably accepted these seemingly unpopular measures and reforms because we made it clear that the goal is to reduce the budget deficit, which had become unsustainable, and redirect financial support, as much as possible, towards the neediest population.

What are the next steps in the reform process?

BENKIRAN: We are still subsidising sugar and flour, but the subsidy that is weighing significantly on the budget is the one directed towards butane gas. And the latter will be harder to reform due to the large spectrum of butane users, particularly the vulnerable population. Indeed, because it is subsidised by nearly two-thirds, people prefer using this source when they need energy. However, it is being used beyond domestic needs, for agriculture, extracting water, and heating greenhouses, restaurants or hotels. There are even cars that run on butane gas. If we do nothing, the subsidy will cost the budget around Dh18bn (€1.6bn) or 2% of GDP in 2016. Because it is sensitive, we are trying to develop an approach that allows us to target support towards the most vulnerable population.

If we manage this, we can spend around Dh6bn (€534m) and save around Dh10bn (€890m), which can be directed towards other priorities. My view on this is that if we alleviate the burden on the state, improve its efficiency and save money, we will certainly be able to address complex issues that require the state’s intervention, such as improving the quality of education and health services for all. In this regard, I firmly believe that the state’s role is not to finance all sectors but rather to regulate, control, coordinate and intervene to correct the situations of disequilibrium, would they be economic or social.

What needs to be done to reduce unemployment?

BENKIRAN: Unemployment is one of the hardest issues that the government is facing and a challenge we have to address. Investments are necessary and are improving, but it is not enough to just give jobs to citizens; they need to find employment that allows them to live in a decent way. There are programmes in place, but they have not been as successful as we wished. In this regard, efforts to create jobs within different sectors are being undertaken. More than that, we need to initiate smaller-scale reforms and encourage people to work for themselves, which can provide opportunities in different sectors. We are working towards developing new approaches and more targeted measures to bring youth into the job market.

How can the business environment be improved?

BENKIRAN: This is one of the government’s top priorities. Through constant dialogue and interaction with the private sector, we have worked to improve laws and regulations and simplify administrative procedures. This has helped activate reforms that many companies have been waiting almost 20 years for. Arrears paid to oil operators, for example, fell from Dh21bn (€1.87bn) at the starting of this government to less than Dh1bn (€89m) today. Morocco’s rise in international business climate rankings is another illustration of the progress being made. The result is the preservation of Morocco’s attractiveness and competitiveness in a region with a turbulent political and economic environment.