Abdelghani Youmni: “Activating the budget deficit lever through compensation will not be enough!”

Abdelghani Youmni
Economist and public policy specialist

Faced with the crisis in production costs, inflationary pressure, and the crisis in raw material and energy prices, along with the resulting concerns, the blockage will not be enough! For Abdelghani Youmni, economist and public policy expert, social peace will be built with greater tax justice, even in times of crisis, and through concessions shared between households, companies with high revenue and public authorities. The public policy specialist provides ways to explore in order for Morocco to protect itself from the effects of the current crisis.

Knowing that 90% of Morocco’s energy needs are now covered by imports, mainly oil, and due to the crisis and rising price of a barrel, which exceeds 100 dollars, what is its likely impact on compensation fund?

The barrel of oil is approaching 140 dollars, the absolute record was reached in 2008. In question, a series of aggregated and destructive reasons for the price factor. It begins with a strong global economic recovery since the spring of 2021, followed by a 7-fold increase in freight costs and, finally, war in Ukraine. It should be noted that Russia provides 50% of Europe’s needs in gas and 25% in oil. This situation is reminiscent of the two oil shocks of 1973 and 1979.

Plugging will not be enough if the geopolitical conflict continues because it will install structural inflation, recession and debt crisis. For Morocco, 90% of its energy needs are covered by imports. Without refineries, Morocco imports gasoline and diesel, two accelerators of the cost of living, weakening its energy sovereignty vis-à-vis suppliers and distributors. It cuts the economy part of the value added, jobs and by-products created by the oil refining industry and weakens its sovereignty.

As for the compensation bill, it will be heavy, knowing that the government, in the spirit of hope, has only released 15 billion dirhams to support purchasing power, through support for transporters, the price at the pump and food products. The cost of living has reached more than 5% but this should not make the inflation bed which, today, contains approximately 1.4%. It should not be the underlying, i.e., a general and seasonally adjusted price increase, thus neutralizing any public spending or taxation policy to alleviate the erosion of household purchasing power.

Contrary to many economists, I do not expect Morocco to experience this type of inflation for some financial, social and economic reasons. The high cost of living, on the other hand, is true and the lever of the budget deficit, through greater compensation, will not be enough to reduce it; on the other hand, it will aggravate the burden of public debt without a positive effect on growth.

Social peace cannot be bought but is built with greater tax justice, even in times of crisis, and with the construction of equity, through concessions shared between households, high -income companies and public authorities. .

What is needed for Morocco to protect itself from the effects of the current crisis, knowing that prices and the cost of living are exposed and that energy charges are rising?

In the 1970s and 1980s, the two oil shocks resulted in rising oil prices and fuel prices as well as all finished products, transportation, food and housing. Today, we face the same scenario after nearly 12 years of deflation and often negative core rates. The current crisis is similar to the two oil shocks. A crisis born of a major geopolitical conflict, in a globalized world more dependent on energy, semiconductor and input sources. Since Morocco is not a separate country, the impact on prices and the cost of living will be significant.

To protect itself, it must continue its march towards partial energy sovereignty that will allow it, by 2030, to produce 52% of electricity from renewable energies. This thirst for stability and independence must be accompanied by an acceleration of the reduction of the informal sector to index wages and social contributions to inflation. Added to this is another precautionary mechanism, the introduction of a floating fuel tax, up or down, that goes beyond the price variation of a barrel exceeding the 15 to 20% estimated by the PLF.

It should be noted, in fact, that when the barrel reaches from 80 to 120 dollars, the revenue from taxes (TIC and VAT) on fuel increases and the reduction in tax rates, in this case, can reduce impact on purchasing power and inflation. For distributors, this is the same configuration.

High prices mean more revenue per liter but fewer volumes sold; the downward trend of pump prices is not only an act of economic patriotism but also a factor in fighting the recession and declining investment and production.

The impact of these increases is starting to cause confusion, especially on carriers. What levers should the State activate so that the purchasing power of households is not affected?

These eddies are not specific to Morocco. But more importantly, we should congratulate ourselves on the stability of the dirham, which has lost only between 5 and 10% against the dollar and euro over the past three months, while some currencies of countries affected by the crisis in the production costs and the prices of raw materials, especially energy, have fallen by 40 to 50% because they can be exchanged and are subject to speculation, then exposed to major exchange risks due to total reliance on economy in international trade, freight and financial markets.

Over the past sixty years, the average inflation rate in Morocco has been 4.2%, one of the lowest in the world, the high cost of living is cyclical and, if it is often dependent on energy costs, it is also associated with performance. of the agricultural sector and rainfall. The current crisis brings together elements such as post-Covid-19 overheating, additional freight costs and the Ukrainian crisis, with pressure exerted on the prices of hydrocarbon, cereals and industrial inputs and the impossibility of planning and anticipation. It also opens the pandora’s imaginary box.

A metastasis that threatens household confidence, plagues society’s climate and causes a scissor effect resulting in rapid price increases and decreased purchasing power, not only for Moroccans but for all low -income households. we. income and middle classes around the world. The State must guarantee the safety of the economic and social system, safeguard financial order by avoiding rising interest rates and fight as a priority against the millefeuille of intermediaries, which creates an immoral speculative market that takes free trade hostage, between consumers and producers, of agricultural and fishery products.

This market anomaly abnormally raises prices, lowers the income of farmers and fishermen and undermines citizens ’confidence in the sovereign power of the state during crises and beyond. But ultimately, the spectacular resurgence of inflation in some countries, synonymous with a tsunami of costs, will not lead to structural inflation in Morocco in the short and medium term.

In reality, the country will not experience financial inflation, the result of real estate and stock market bubbles, because it is not yet sufficiently globalized financially, these sovereign debts are mainly held by local subscribers, banks and institutions.

That’s unusual! Moroccan households make their food at home from fresh produce, which breaks down in part the additional cost of processing frozen foods and ready -to -eat foods, which undoubtedly reduces GDP but is more helpful. to protect the economy from inflation. in case there is pressure on production costs associated with logistics or the price of energy and labor.

Modeste Kouamé / ECO Inspirations

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