Morocco Nears Fuel Price Cap to Stem Swelling Street Anger

(Bloomberg) -- Morocco's government has finalized a plan to cap fuel prices as it seeks to defuse anger over the cost of living that has already sparked street protests and a consumer boycott.

The plan, which must still be approved by Prime Minister Saad-Eddine El Othmani, allows the government to adjust fuel prices every 15 days. It would run for six to 12 months, General Affairs Minister Lahcen Daoudi said in a telephone interview, adding that El Othmani was expected to “sign it any time. All I can say now is that it will be enacted this year.”

While Morocco's inflation rate is one of the lowest in the region, and the country has been spared much of the post-Arab Spring violence that gripped other nations, price increases are grazing a five-year high, unleashing social unrest that has worried the government. Consumer inflation was an annual 2.6 percent in May, and the central bank expects it to stay around that level this year before falling to 1.4 percent in 2019.

Increases in the prices of dairy products, mineral water and fuel triggered a social media-driven boycott campaign that has hit the balance sheets of companies like French food giant Danone.

In Morocco Boycott, Anger, Layoffs and Bloated Udders

Fuel subsidies were lifted in 2015 as part of an austerity program. As the boycott started to take its toll, a parliamentary committee in May released a report that showed fuel distributors and the Treasury profited at consumers' expense. The Treasury saved as much as $3.6 billion annually, while distributors excessively increased their margins and short-changed the government on pledges to expand storage capacity, lawmakers said.

Under the new plan, the government can impose temporary measures to counter excessive fluctuations in prices brought about by extraordinary measures, Daoudi said.

While the proposal would impact the margins of distributors like Total Maroc and Vivo Energy, “constant dialogue will be maintained” with the Moroccan Petroleum Group, the industry operators organization known by its French acronym GPM, according to Daoudi.

Shares in Total Maroc, the North African country's second largest fuel distributor, have fallen by almost 50 percent on the Casablanca stock exchange since May 9, when Daoudi announced that the government intended to cap fuel prices.

Adil Ziady, GPM's chairman and a senior executive at Afriquia, the country's largest fuel distribution company and a boycott target, declined to comment on the planned price cap. In an April 25 interview commenting on the boycott campaign against his company, Ziady blamed public discontent on the dismantling of fuel subsidies and the rise in crude prices.

To contact the reporter on this story: Souhail Karam in Rabat at skaram10@bloomberg.net

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Amy Teibel, Mark Williams

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