IMF Urges Morocco to Liberalize Electricity Market

The IMF urged Morocco to liberalize the electricity market to boost private sector participation in renewable energies and reduce dependence on imported fuels.

“Liberalizing this market would meet nationally determined contribution targets to reduce emissions, adapt to the impacts of climate change, improve corporate competitiveness and help create jobs,” according to a report by the lending institution as part of the second review of the “Facilitation of Resilience and Sustainability” agreement.

The management of the electricity market in Morocco depends on government decisions that include all levels of the value chain, starting with the choice of technology and the type of fuel at the level of production and then setting the selling prices for the end consumer, where the final prices are approved by a government decision.

Electricity prices in the Kingdom do not reflect the real cost as long as they are not linked to variable costs, according to a previous report by the Competition Council, an institution that regulates free and fair competition in markets. He called on the government to ease the role of the National Electricity and Water Office in the electricity value chain and open the way for private producers to market production with an agreed tariff.

“The current context of persistently high food prices and high unemployment rates will make it socially acceptable to raise taxes on coal and other highly polluting products rather than imposing a higher value-added tax on fossil fuels,” the IMF believes.

The Fund’s recommendations also included the rapid implementation of the remaining measures under the “Facilitation of Resilience and Sustainability” agreement with the aim of supporting the Kingdom’s green transformation, and stressed the need to focus efforts on further liberalizing the electricity sector, greening the tax system, addressing the risks posed by climate change to the stability of the financial and tax systems, and protecting the country’s dwindling groundwater resources.