Uncertainty and droughts guide the preparation of the 2025 Finance Bill

The government moved to an advanced stage in preparing the draft Finance Law 2025, after Aziz Akhannouch, the Prime Minister, circulated a circular to the two disbursement orders last March in order to submit proposals regarding expenditures and resources for the next budget, on the basis of transferring them to the various ministerial departments within the first 15 days. Since last April, before moving on to compile proposals from the private sector and professional representations, especially the tax procedures and tax measures proposed to solve a group of current problems.

In the process of preparing the next financial project, the programming and performance committees at the level of the Ministry of Economy and Finance deliberated on the proposals that were collected before the middle of last month, with the prospect of the Ministry presenting the general framework of the project before the end of next month. This relates to a series of routine steps that this government and its predecessors have taken in recent years, with an emphasis on the different terms and conditions for preparing each financial project separately, as the current state of uncertainty and the repercussions of the drought guide the process of preparing the draft financial law for next year.

Statistics and figures indicate that Morocco is under the influence of many circumstantial restrictions that affect its economy, as it is expected to achieve an average growth rate in 2024 and 2025 in the range of 3 percent, while the repercussions of the drought continue to worsen, causing the loss of more than 180,000 jobs during the two years. the past two years, especially in rural areas; While the government committed to creating 550,000 jobs by 2026, in parallel with the unemployment rate rising to 13 percent, which is a record number, in addition to the corporate bankruptcy rate of 15 percent, and the ratio of public debt to the gross domestic product, which exceeded 80 percent.

Uncertainty

At a time when expectations indicate that the Bank of Morocco will maintain the current main interest rate without change (3 percent) during the administrative council held in a few days, the government is considering alleviating the state of uncertainty that the national economy is experiencing in light of the current local, regional and international changes, which have given dimensions New inflation, price disturbances in markets, and imbalances in supply and value chains, after the extension of the time period for the Russian war on Ukraine, the increase in protectionist and customs measures in a large number of countries, and the continued rise in energy prices and global transportation and logistics costs.

Radwan Naimi, an economist specializing in public finance, commenting on the state of the national economy during the current period, which coincides with the preparation of the draft finance law for the year 2025, explained that “international conditions carry a set of uncertainties that could negatively affect the national economy,” stressing that “Geopolitical tensions, especially the wars in Ukraine and Gaza, pose great risks to the stability of oil prices and some food products, such as wheat, while Morocco relies heavily on imports to meet its needs in light of the worsening repercussions of drought on the agricultural season,” he warned, saying that “even The main indicators of the Kingdom’s partners, especially Europe, do not carry clear data that could positively affect exchanges between the two sides.”

Naimi stressed, in a statement to Hespress, that “the state of uncertainty facing the national economy will complicate the government’s task of controlling financial balances through the upcoming financial draft law, which faces major challenges related to bearing the cost of the wage increase, which was approved within the framework of the social dialogue.” He explained that “doubts will also increase about this government’s ability to finance new expenditures, knowing that it is under pressure from other financial burdens related to social protection programs and universal health and retirement coverage, in addition to the costs of structural projects related to providing the necessary infrastructure to receive the FIFA World Cup finals.” Year 2030.”

Additional taxes

An increase in taxes or the imposition of new tax measures within the framework of the draft Finance Law 2025 could constitute a solution to ensure coverage of future financial obligations and maintain public financial balances in light of the current economic circumstance, which requires covering financial obligations and public expenditures urgently, especially as they concern investments in Infrastructure, universal social coverage, and support for basic public services; These challenges coincide with the increase in the value of the state’s financial obligations, which imposes raising tax revenues as a first option to maintain the balance of the balance sheet and ensure its continued responsiveness to international credit conditions.

Muhammad Amin Al-Hassani, an expert in applied economics, confirmed in a statement to Hespress that “the current indicators of the national economy require the government to include new tax measures in the next draft financial law, either by increasing taxation rates, imposing new taxes, or expanding the tax base.” Stressing that “any other option will exacerbate the risk of the budget deficit, which has been on a downward trend for some time, from 7.6 percent to 4.4, noting that expectations indicate a rate of 4 percent at the end of 2024, and 3.5 percent during 2025,” noting in In the same context, “Imposing social obligations is a cost that must be borne in the long term,” and alerted to “the necessity of taking urgent measures to mitigate the effects of drought, by mobilizing important funds to support farmers, and continuing the program to build seawater desalination plants.” Under these circumstances, the government will be forced to make sometimes difficult decisions in order to ensure the balance of its budget.”

In the same context, Al-Hassani revealed “the sensitivity of the procedures for increasing taxes in the upcoming draft finance law, given the challenges associated with avoiding hindering economic growth, while ensuring the provision of the necessary resources for public expenditures,” stressing that “consultations with the concerned authorities, including representatives of the private sector, necessary to reduce negative impacts and ensure a fair distribution of the tax burden,” noting that “tax increases must be accompanied by incentive measures that prevent a slowdown in economic growth, by reducing consumption and investment, with the necessity of fortifying current gains, represented by the stability of growth, the position of safe exchange reserves, export mobility, and transfers.” Moroccans abroad.”