October 19, 2019 / 7:02 AM / 5 months ago

Morocco forecasts stable 2020 fiscal deficit of 3.5%

RABAT, Oct 19 (Reuters) - Morocco’s fiscal deficit is expected to be unchanged at 3.5% of gross domestic product in 2020, the government’s draft budget showed.

The estimate, which edges closer to meeting Morocco’s medium-term debt-to-GDP goal of 3%, was based on expected privatisation receipts of 3 billion dirhams ($313 million), the document seen by Reuters shows.

Other factors influencing the deficit in 2020 include the cost of a public wage hike set at 6 billion dirhams and the allocation of 26 billion dirhams to boost the purchasing power of the poor, it said.

The cost of subsidies of sugar, semolina and cooking gas would be cut to 13.6 billion dirhams in 2020 from 18 billion this year.

The portion of the budget going to education would expand to 72.4 billion dirhams while that of health would jump to 18.6 billion dirhams. Both have been identified as priority spending areas in the draft budget. Assuming an average cereals harvest of 7 million tonnes and an oil barrel price at 67 dollars, growth is expected to stand at 3.7% in 2020 from 2.9% in 2019.

The central bank and the International Monetary fund however, have said the economy would only grow by 2.7% this year on the back of a lower cereals yield due to a lack of rainfall.

The draft budget introduces tax incentives to encourage the declaration of assets and the repatriation of cash in foreign currency, aiding Moroccan banks which have been hit by falling deposits this year and bolster the tax base in line with the government goal to bolster revenue.

The government plans to continue clearing the stock of value added tax repayments by releasing next year 10 billion dirhams owed to public and private enterprises. Morocco’s Doing Business ranking rose from 128 in 2010 to 60 in 2019.

Public investment would increase to 198 billion dirhams in 2020, from 195 billion this year. (Reporting by Ahmed Eljechtimi; editing by Angus McDowall and Alexander Smith)

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