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Morocco to split energy windfall between deficit, spending

The government obtained a precautionary $5 billion, 24-month financing facility from the International Monetary Fund in July

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Morocco’s government is likely to split any budget windfall due to lower energy prices between deficit reduction and fresh spending, Finance Minister Mohamed Boussaid said.

“We are looking at three things: reducing the deficit, public investment and increasing social services,” Boussaid told Reuters on the sidelines of a business conference late on Thursday.

The government, which obtained a precautionary $5 billion, 24-month financing facility from the International Monetary Fund in July, estimated last month that its budget deficit would shrink to 4.3 percent of gross domestic product next year from 4.9 percent this year.

That forecast assumed an average oil price of $103 a barrel. With Brent crude now below $80, state finances are set to benefit if current prices are sustained.

The government ended subsidies for gasoline and fuel oil early this year, reducing the budget’s exposure to oil prices. But it maintains diesel subsidies at a reduced level as well as big subsidies for cooking gas, one of the most politically sensitive commodities.

It could also benefit from lower oil prices because of the boost to economic growth and tax revenues; energy imports cost the resource-poor country about $9 billion in the first 10 months of this year.

Boussaid estimated last month that the economy would grow 4.4 percent next year, up from 2.5 percent this year, but he said on Thursday that growth would accelerate to higher levels if oil prices stayed low for an extended period.