Morocco rethinks welfare with direct aid and social protection reforms

Friday 24 October 2025 - 17:20

By: Dakir Madiha

Morocco rethinks welfare with direct aid and social protection reforms

Morocco is undergoing a significant transformation in its approach to welfare and social protection, aiming to modernize its support systems while addressing long-standing economic and regional disparities. Central to this shift is the gradual reduction of the Compensation Fund, the country’s hallmark subsidy program, in favor of direct payments to low-income households and investments in broader social services.

A legacy of subsidies

For decades, the Compensation Fund has been a cornerstone of Morocco’s social safety net, subsidizing essential goods like butane gas, sugar, and flour to shield citizens from price shocks. However, the system’s inefficiencies have become increasingly apparent. A 2015 analysis revealed that while low-income households made up a third of the population, they received only 7% of fuel subsidies, with the wealthiest Moroccans benefiting the most. By mid-2022, subsidies on butane gas alone accounted for 71% of the product’s market price, costing the government millions annually.

In response, Morocco began phasing out certain subsidies, including liquid fuel subsidies in 2015, redirecting resources toward direct aid for vulnerable families. This shift aligns with broader economic reforms and the nation’s efforts to diversify its economy, which has grown by 25% since 2015.

Learning from global models

Morocco’s welfare transition mirrors aspects of U.S. federal block grants, which allocate funds to local authorities for targeted social programs. Much like the U.S. approach under President Ronald Reagan’s “New Federalism” in the 1980s, Morocco is decentralizing social protection administration through its advanced regionalization program. This strategy empowers local governments to address community-specific needs while ensuring greater accountability.

A new era of social protection

The government is implementing a comprehensive social protection plan that includes direct financial aid, vocational training, unemployment benefits, and compulsory health insurance for all citizens, including self-employed workers. By 2026, monthly child allowances will increase, offering higher support for school-aged children, orphans, and children with disabilities. Aid for out-of-school youth will also rise, reflecting a commitment to reducing poverty and supporting at-risk demographics.

These reforms are backed by robust financial commitments. In 2026, Morocco plans to spend MAD 41.5 billion ($4 billion) on universal social protection projects, a 10% increase from 2025. The World Bank has also approved a $250 million financing package to support these reforms, including the development of a unified social registry to better identify and assist vulnerable households.

Addressing challenges and future prospects

Despite progress, challenges remain. Inflation continues to strain family budgets, with essential costs rising faster than income gains. However, Morocco’s economic diversification, bolstered by growth in manufacturing, tourism, and foreign investment, is expected to mitigate these pressures. In 2023, non-agricultural GDP grew by 3.8%, signaling a recovery from pandemic-related disruptions.

The Solidarity Fund, introduced to aid uninsured households during crises such as the 2023 Al Haouz earthquake, exemplifies Morocco’s evolving approach. While smaller in scale than the Compensation Fund, it reflects a shift toward targeted assistance aimed at addressing immediate needs rather than providing blanket subsidies.

Morocco’s welfare reforms, though controversial, represent a bold attempt to balance fiscal responsibility with social equity. By reallocating resources and leveraging innovative support mechanisms, the nation is paving the way for a more sustainable and inclusive future.