Reforming Subsidies in Morocco

The cost of the subsidy system in Morocco peaked at 6.6 percent of gross domestic product (GDP) in 2012, an amount larger than the country’s total investment budget for that year. Direct subsidies to households in 2013 (October 2013 prices) are estimated at DH34.4 billion (US$4.1 billion, or 3.9 percent of GDP). Replacing direct subsidies with a universal per capita annual cash transfer of DH749 (US$90) would leave the poverty rate unchanged, while reducing direct subsidies to DH24.6 billion (2.8 percent of GDP). It is possible to reduce direct subsidies further by targeting only a part of the population, down to DH2.4 billion (0.3 percent of GDP), if only the poor were targeted. However, to implement selective targeting, the government of Morocco would need to substantially strengthen its social protection system.