MOROCCO – The Moroccan government adopted a decree canceling the value-added tax (VAT) on agriculture inputs in a bid to lower food prices.
According to Zawya, the measure is in line with government efforts to curb inflation for farm produce after food inflation soared 20.1% in February, bringing general inflation to 10.1%, a level unmatched since the 1980s.
In detail, the VAT exemption covers production equipment and other products used to maintain plants in good condition, ” Prime Minister Aziz Akhannouch said in the statement.
The decree comes after the United Nations’ Food and Agriculture Organization’s (FAO) quarterly report indicated that drought and low rainfall drove Moroccan cereal production down by 60% to mark the largest decrease in the North African region in 2022.
The country suffered its worst drought in decades, leading to an estimated cereal production of nearly 3.3 million tonnes from the 10.4 million tonnes produced in 2021, a drop of more than 60%.
FAO revealed that the reduced output has naturally had an effect on food prices in the region, with food price inflation continuing to increase at high levels in most of the region.
In addition to reduced output, FAO attributes the skyrocketing inflation to several crises that disrupted global production and supply chains. Further, the global market is yet to recover from the effects of Covid-19 and the Russia-Ukraine war which had significantly affected purchasing powers.
To compensate for the reduced production, FAO has estimated that the region’s aggregate cereal import needs hits 51 million tonnes in the 2022-23 year, an increase of 2% from the average.
Recently, the country modified its wheat import subsidy scheme to make it easier for companies to bring in cargo from the Black Sea region.
The US Department of Agriculture’s Foreign Agricultural Service estimates Morocco will import 7.5 million tonnes of wheat in 2022-23 to cater to its 37 million population.
However, the agriculture minister and the Association of Moroccan Fruits and vegetable producers (APEFEL) ascribe the high prices in the Moroccan market to higher production costs notably those of fertilizers and pesticides.
Speaking to MPs, APEFEL representatives said ammonia and phosphates-based fertilizers saw prices rise 466% and 61% respectively, which was, in turn, repercussed on consumer prices.