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Morocco Approves Expansionary $40.8 Billion 2012 Budget

April 12 (Bloomberg) -- Morocco’s parliament approved a delayed budget that set spending at 346 billion dirham ($40.8 billion), and targeted a deficit of around 5 percent, as the North African country looked to stave off unrest that has rocked other Arab nations.

Revenue for 2012 was projected at 314.5 billion dirhams. The government also looked to boost public sector jobs by 40 percent, a move aimed at easing disquiet in the country where urban unemployment was at about 9 percent.

“That massive increase in public sector jobs is a bit awkward,” Said Hirsh, Mideast economist with Capital Economics, said in a telephone interview from London today. “Once they’re in place, they would have to be supported further down the line. That’s one thing that could be a burden in coming years.”

Hirsh said that economic growth was projected to slow to 2 to 3 percent, while inflation was seen as climbing - twin developments that could add more pressure on the government.

The budget was based on an oil price of $100 a barrel, a level that may be too conservative, he said, and could end up costing the government more as it supports subsidies. The new plan allocates 46.5 billion dirhams for government subsidies.

Public investments were set to rise to 188 billion dirhams for the year from 167.3 billion dirhams in 2011.

‘Fiscal Reforms’

“The budget is expansionary -- big increases in subsidies, recruitments -- but no real effort has been put in fiscal reforms,” said Zouhair Ait Benhamou, a Moroccan blogger who closely watches the country’s economy and writes on the “Moorish Wanderer” blog. “Tax loopholes have not been closed, the moratorium on agricultural tax still benefits only a few wealthy farmers and the income tax falls heavily on middle classes.”

Coalition parties that won last November’s elections, led by the Islamist Justice and Development party, raised taxes on alcohol for the first time since 2010 by 12 percent for beer and 43 percent on other alcoholic beverages.

The budget establishes a new “solidarity tax” of 1.5 percent on profits of companies whose annual profits are 50 to 100 million - measures aimed at addressing the social inequalities in the country.

Finance Minister Nizar Baraka said recently in parliament that the new budget bill aims to boost domestic growth, promote investment and boost social solidarity efforts. He said the government wants to reduce the deficit to 3 percent from 5 percent by 2016.

Last year, the country’s budget deficit widened as it spent heavily in an attempt to curtail economic challenges that helped spark uprisings elsewhere in the Arab world.

To contact the reporter on this story: Aida Alami in Cairo at aalami2@bloomberg.net

To contact the editor responsible for this story: Digby Lidstone at dlidstone@bloomberg.net

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