The Moroccan government will implement its recently announced decision to liberalise fuel prices as of September 16, the government said in a statement on its website. The prices of diesel, fuel oil and gasoline would be reviewed twice a month depending on the crude oil prices on the international markets. Prices of cooking gas and sugar will remain fully-subsided. The liberalization of fuel prices, which is in line with the IMF’s recommendations, was supposed to take place in July 2013 but was delayed until after Ramadan that ended on August 8. The decision prompted Morocco’s Istiqlal party, which had six ministries in the current governing coalition, including the finance ministry, to leave the cabinet earlier in July.

Higher public salaries and subsidies in Morocco have raised concerns on its ability to push forward with much needed reforms to help streamline the budget deficit. The IMF, which agreed in 2012 on a two-year USD 6.2bn precautionary credit line with Morocco, has called on the government to reform its subsidy system and stressed the importance of moving ahead with pension reform to ensure the systems viability.

Subsidies cost the Treasury MAD 54bn (USD 6.3bn) in 2012, accounting for 6.4% of Morocco’s GDP, according to official estimates. Morocco hopes to reduce its subsidy bill by 20% to MAD 42bn in 2013.

The FY 13 state budget forecasts a MAD 21.843bn deficit, accounting for nearly 5% of GDP, 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.

Morocco's state budget gap widened 27% y/y to MAD 30.4bn (USD 12bn) in January-June 2013 on falling revenue and rising spending, mainly on wages, subsidies and debt servicing, the central bank said in August.