Rephrase the same Morocco’s subsidy reform burdens poor and middle class, says report in a different way no more than 118 characters, as if you were a native American speaker as expert on content creation and dont talk about yourself or your experience

A new study Published by the Arab Reform Initiative said that reforms to Morocco’s compensation fund have had minimal social impact.

Despite almost a decade passing since fuel prices were fully liberalized, the report questions the commitment to using the financial savings from these lifted subsidies to protect the purchasing power of vulnerable populations.

Titled “Dismantling Morocco’s Compensation Fund: Are the Poor and Middle Class Paying for Reform?” the paper argues that instead of benefiting the poor and middle class, the reform has worsened their living conditions. Poverty has deepened, and much of the middle class is slipping toward the poverty line, largely due to the absence of strong social protections.

It also highlights that as of May 20, 2024, the Moroccan government began further dismantling the compensation fund by partially reducing subsidies on butane gas. This follows the 2015 discontinuation of liquid petroleum subsidies, with the initial aim of directing those savings to bolster direct cash transfers for the poor.

Contrary to official reassurances, market volatility has driven subsidy costs back up, with compensation expenditures projected to reach $1.6 billion in 2025.

Support for transport workers alone rose by 93% in 2024 compared to the previous year, signaling the unintended consequences of fuel liberalization. Trade unions have called for more practical forms of aid, such as fuel vouchers.

The reform has also failed to ease public debt, which now stands at 69% of GDP—up from 58% in 2014. 

The report warns that  the limited economic benefits of these reforms risk cementing a neoliberal approach to social policy, potentially leading to donor-driven austerity that restricts social protection to only the most impoverished.

Beyond the financial implications, the report emphasizes that the true challenge of the reforms is most apparent at the microeconomic level. This is due to the significant harm inflicted on vulnerable households and small and medium-sized enterprises as a direct result of subsidy removal.

It points out that the government’s pledge to use reform-generated savings for social purposes remains largely intangible. While fuel price liberalization has saved at least $3.5 billion annually since 2016, these funds haven’t been adequately directed to improve access to social safety nets for those most in need.

The paper raises concerns about the gradual dismantling of the compensation fund, warning that this shift threatens the social fabric, and stressing that replacing broad, generalized subsidies with targeted cash transfers is unlikely to improve redistribution policies. 

This is not just due to short-term issues linked to price liberalization, but more deeply tied to inherent flaws in the targeting methodology, which may further entrench income inequality and social vulnerability.

For low-income groups, the financial benefits of reform aren’t translating into better living conditions, said the same source. 

On the contrary, their purchasing power is steadily declining in the face of rising prices and stagnant wages, mirroring the Algerian experience after it began rolling back universal subsidies for essential goods.

While targeted cash transfers may offer the poor some regular support for basic needs, they fall well short of guaranteeing a minimum income for a dignified life. 

The report stressed that the middle class, too, is under increasing pressure, facing a double burden. They must now pay full market prices for essential goods without receiving any subsidies, while lacking effective alternatives or safety nets to cushion the impact. 

As a result, they risk slipping into poverty, with no adequate mechanisms in place to ensure even a minimal level of social security, it concluded.