Executive Summary
In a context of an economic shock, the ordinary balance in Morocco would go into negative territory for the first time since the 2012-2013 crisis with a deficit of MAD -15 Bn according to the 2020 AFA. With a view to a close dissipation of the health crisis, and a resumption of economic growth in 2021, it is legitimate to wonder about the Treasury's ability to return to an ordinary surplus, a key indicator of a healthy situation for public finances.
For this stake, we observe the historical evolution of the revenue and ordinary expenditure pair of the Treasury, to emerge with a structural behavior far from any cyclical distortions. This analysis is instructive in terms of identifying levers for a balanced budget. It turns out that the increase in tax revenues is fueled only marginally by economic growth or by the broadening of the base. While non-tax revenues, deemed irregular, support income. Likewise, the most signif-icant cost savings are rooted in subsidies reform, while considering the efforts to limit the increase in the wage bill and the active management of the debt which makes it possible to contain the increase in its cost.
This structure of public finances made it possible, starting 2014, to restore an ordinary surplus balance. Still, this bal-ance did not ultimately withstand a shock. In this context, we believe that the recovery of the ordinary balance is more a need for revenue enhancement rather than cost savings. Indeed, the expenditure structure supports our remarks. The dominant share has little improvement leeway.
Following an analysis of the different headings of ordinary income & expenditure, we believe that a return to break-even would be possible starting from 2022-2023. Our projection is based on a number of factors which would contribute to the rebound in revenue towards its pre-Covid-19 level.
In the end, we would like to remind you that the purpose of this exercise is not to come out with a target level of the ordinary balance from 2022, but rather to list the main items to monitor, to identify their room for improvement, all this to define the Treasury's overall capacity to return to its pre-crisis balance.
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