Morocco to cut fiscal deficit to 3% in 2026, thanks to higher tax revenue

Morocco expects to further cut its fiscal deficit from 4% in 2024 to 3.5% in 2025 and 3% in 2026, despite an increase in spending on social protection, Fouzi Lekjaa said.

The deficit was at 7.1% when the government took office in 2021, at a context marked by a recovery from the economic impact of the Covid 19 pandemic and the outbreak of the war in Ukraine that sent commodities prices skyrocketing.

Mandatory health insurance, direct financial support to needy households, salary hikes and housing aid means 90 billion dirhams in additional spending, Fouzi Lekjaa said

He said 3.9 million households or 8 million people benefit from mandatory health insurance for free while another 3.7 million households receive direct aid.

Increased spending on social protection would be funded by an increase in government’s revenue, he said.

In three years, the government, mainly through taxes, mobilized an additional 100 billion dirhams, he said, citing reforms of the corporate and value added taxes.

Meanwhile, the government continues to subsidize soft wheat, sugar and electricity prices in addition to offering aid to professional transporters and famers to prevent a spike of inflation, at a context of high energy prices.

The government spent 9 billion dirhams to help the electricity operator keep prices stable, he said.

These reforms meant that Morocco would not resort to foreign debt to fund its social protection plan and that debt would decrease to less than 70% in 2026 from 72.2% in 2021, Lekjaa said.

This fiscal consolidation earned Morocco improved ratings by S&P and Fitch ratings, while the IMF and World Bank praises in their recent reports the resilience of Morocco’s public finances.