BREAKING DOWN THE BUDGET

Morocco 2020/21 | FINANCE | FOCUS

Though estimates of total growth are likely to take a beating this year, Morocco's 2020 budget allotted additional funds for health and education, an expanded public sector, and sizably larger military spending.

THE GOVERNMENT AND MINISTRY OF FINANCE are doing everything in their power to make Morocco more attractive to investment, especially by enacting a set of budgetary policies that will see increased investments in health and education and public spending, even if also slightly reducing subsidies for basic items such as butane gas, sugar, and flour to MAD14.6 billion (USD1.46 billion) over the next year. That said, it is also honing its focus on boosting lower and middle class purchasing power, to which end it allotted USD2.6 billion in its 2020 budget. The largest allocations of all were made to health and education, which will collectively receive USD9.1 billion in 2020, long-term investments needed to create and sustain a middle-class capable of perpetuating itself. This includes USD170 million for the RAMED medical assistance scheme, in addition to a new Mandatory Disease Insurance (AMO) for students and USD350 million to strengthen social support and schooling for vulnerable groups, especially in rural areas.

The government also allocated nearly USD1.8 billion to reduce social and spatial disparities in terms of access to basic social services, health, and education. This last dispersal will overlap with Phase III of the National Initiative for Human Development (INDH), the King's long-term plan to boost the country's middle class, which has allocated USD2.2 billion for 2020 for a new series of income generating and employment initiatives. In order to achieve the above, the government has budgeted hiring an additional 23,000 civil servants in 2020, 4,000 of which will serve in the healthcare sector and 16,000 in national education. How will it pay for the above? Assuming a cereals harvest of 7 million tons and an oil price of USD67 per barrel, the government originally calculated the economy would grow by 3.7% in 2020. Though this is now highly unlikely, it is also undertaking a number of privatization measures that are expected to generate USD300 million and a series of innovative financing methods that should generate another USD1.2 billion. What are these? For starters, the government is revisiting its successful 2014 amnesty of getting Moroccans with offshore wealth to repatriate their capital, a policy that saw USD2.7 billion returned to Morocco that year alone. As a more immediate policy, it is also raising taxes on beer by 11% and wine by 14%. Granted, with oil trading at below USD30/barrel in early 2020 thanks to both COVID-10 and the Russia-Saudi price war, the government's estimated 3.7% growth is unlikely. But this is why longterm investments in sectors critical to middle-class growth are allthe-more important. In addition to boosting the number of civil servants by 23,000, the government is also enacting wage hikes of 6%
for public sector workers, well above the country's 2% inflation rate. With total public investment of USD19.8 billion in 2020, a major increase of 44% on 2018, the government must continue to show it is serious about making the right fiscal decisions. So far, the international community believes it is, with Morocco's Doing Business ranking rising from 128th place to 60th between 2010 and 2019 alone.

The military budget is also set to balloon in 2020, surging by nearlya third from USD3.52 billion in 2018 to USD4.54 billion in 2020. This will include the creation of 5,000 new jobs, boosting total payroll in the sector from USD2.43 billion to USD3.32 billion. What's more, the 2020 budget also envisioned a whopping USD1 billion in equipment expenditure for the military, signaling that affronts to Morocco's sovereignty should be the least of her worries in the coming year.