Morocco’s Budget Deficit Widens in Early 2025 Amid Rising Public Spending
Morocco’s budget deficit ballooned to 6.9 billion dirhams (approximately $670 million USD based on current exchange rates) by the end of January 2025, a significant jump from the 1.7 billion dirham deficit recorded during the same period in 2024. This concerning trend, reported by the Ministry of Economy and Finance (Ministry of Economy and Finance Website), highlights the growing pressure on public finances.
The widening gap stems from a faster increase in public spending (up 10.4 billion dirhams) compared to revenue growth (up 5.2 billion dirhams). This imbalance underscores the challenges Morocco faces in managing its fiscal position. Think of it like a household budget: if your expenses grow faster than your income, you’ll inevitably face a shortfall.
While government revenues, after accounting for tax exemptions, deductions, and refunds, saw a 19.3% year-over-year increase and reached 8.2% of the projected budget outlined in the Finance Law, expenditures surged even more dramatically. Ordinary expenditures reached 42.1 billion dirhams, a 11.9% budget execution rate and a substantial 15.9 billion dirham increase compared to January 2024.
A key driver of this spending surge was the 79.8% increase (17.4 billion dirhams) in the cost of goods and services. This could be attributed to various factors, including inflation, increased demand for public services, or changes in government procurement practices. Further investigation into the specifics of this increase would provide valuable insights. Interestingly, subsidy expenditures (compensation) and debt interest payments saw declines of 34.5% (1.1 billion dirhams) and 26.1% (339 million dirhams), respectively. This decrease in subsidies could be due to targeted reforms or fluctuating global commodity prices.
Delving deeper into the expenditure breakdown, personnel costs reached a 7.4% budget execution rate, while “other goods and services” saw a significant increase of 16.1 billion dirhams, reaching a 22.7% execution rate. The nature of these “other goods and services” warrants further scrutiny to understand the underlying reasons for this substantial increase.
Debt interest costs, at a 2.2% execution rate, showed a decrease with domestic debt interest down 250 million dirhams and external debt interest down 89 million dirhams. This could indicate favorable interest rate conditions or a shift in the composition of Morocco’s debt portfolio.
Subsidy expenditures, at a 12.1% execution rate, decreased by 1.1 billion dirhams compared to January 2024. This reduction was primarily driven by lower support for butane gas (down 227 million dirhams), national soft wheat flour (down 190 million dirhams), and sugar (down 179 million dirhams). These changes could reflect shifts in global commodity prices or adjustments to subsidy programs.
The combined effect of these revenue and expenditure trends resulted in a treasury deficit of 9.7 billion dirhams, a stark contrast to the 1 billion dirham surplus recorded in January 2024. Investment expenditures also rose by 751 million dirhams to 13 billion dirhams, reaching a 12.3% budget execution rate.
On a more positive note, treasury special accounts recorded a surplus of 15.8 billion dirhams, up from 9.5 billion dirhams in the same period last year. This improvement suggests a strengthening of certain government financial positions.
This early 2025 snapshot of Morocco’s fiscal situation raises important questions about the sustainability of current spending trends and the need for effective fiscal management strategies. Further analysis and transparency regarding the drivers of these trends are crucial for informed policy decisions and maintaining economic stability. It will be interesting to observe how these figures evolve throughout the year and what measures the government implements to address the growing deficit.
