The International Monetary Fund (IMF) has strongly encouraged Morocco to harness its abundant renewable energy potential as a strategic tool to combat the challenges posed by climate change.
In a recent publication on its official platform, the IMF posits that Morocco stands to leverage its copious and cost-effective renewable energy resources to reduce its heavy reliance on imported fossil fuels, underscoring how this shift can boost the competitiveness of Moroccan businesses in adjacent markets transitioning to sustainable energy, most notably the European Union, and concurrently foster job creation.
Emphasizing the significance of preparing for natural disasters, especially those stemming from climate change, the IMF alludes to the severe earthquake that struck Morocco on September 8, causing substantial loss of life and property.
The report underscores that this incident “underscores the imperative need to fortify the nation’s readiness and resilience in the face of calamities, including those linked to climate change,” which simultaneously presents a substantial threat and development prospects for Morocco.
The document further highlights that Morocco grapples with acute water stress, posing a substantial impediment to the country’s aspirations of transitioning to a new developmental model.
While the Moroccan government has intentions to bolster investments in water infrastructure, the IMF maintains that such efforts must be complemented by comprehensive reforms aimed at “managing water demand, aligning its cost with its actual value, and reshaping consumption patterns.”
The report confirms the approval by the Executive Board of the International Monetary Fund of an 18-month financing agreement designed to support Morocco within the ambit of the Resilience and Sustainability Fund. The primary objective of this initiative is to help Morocco address its vulnerabilities to climate change, enhance its resilience, and capitalize on opportunities emerging from decarbonization.
The IMF siad achieving decarbonization necessitates significant investments in renewable energy, a responsibility that should be predominantly shouldered by the private sector. It also calls for substantial regulatory reforms, including more substantial efforts to liberalize the electricity sector.
Notably, Morocco’s draft budget law for 2024 includes a proposal to reduce the value-added tax applied to electricity production from renewable sources.
The current rate of 14 percent is slated to decrease to 12 percent as of January 1, 2024, and then further to 10 percent in 2025.
This proposal, as per the Ministry of Economy and Finance, is part of a broader strategy to mitigate the effects of climate change and incentivize the use of renewable energy. Simultaneously, the value-added tax rate on electrical energy is set to increase from its current 14 percent to 16 percent in 2024, then 18 percent in 2025, and eventually reaching 20 percent by January 1, 2026.