Morocco's state budget achieved a MAD 11.42bn (USD 1.34bn) deficit in January-March 2013 compared with a MAD 0.224bn surplus the year before as revenue shrank and spending climbed, the finance ministry said. Total receipts dropped 4% y/y to MAD 49.53bn whereas spending increased 19% to MAD 60.95bn.

Public salaries were the major current spending item in Q1, accounting for 43% of the total at MAD 26.1bn, marking a 5% y/y rise. The FY 13 state budget forecasts a MAD 21.843bn deficit on expected revenue of MAD 200.809bn and spending of MAD 222.652bn. The IMF expects Morocco's budget gap to narrow to 4.7% of GDP in 2013 from 6.1% the year before.

The Moroccan government will cut investment spending by 8.3% to MAD 165bn in 2013 instead of the initially announced MAD 180bn to help ease budget burden, the finance ministry has recently said. The spending cut, which is worth USD 1.8bn and accounts for nearly 2% of GDP, is not an austerity measure but optimisation of expenditure, finance minister Nizar Baraka said.

Direct tax proceeds shrank 12% y/y to MAD 21.4bn in January-March, cut by lower corporate tax (down 22% y/y) despite higher income-tax revenue (up 4%). Lower contribution from Morocco’s largest firms like Maroc Telecom and OCP dampened corporate tax over the period.

Indirect tax receipts fell 0.4% y/y to MAD 18.53bn whereas import tax shrank 22%. Domestic VAT income rose 4% to MAD 5.7bn due to stronger local and tourism demand. Debt servicing and subsidies retreated at end-March due to lower grain imports and strong harvest and lower borrowing costs. Domestic debt servicing was virtually unchanged at MAD 5.23bn and that of external debt rose 13% to MAD 520mn.