**Table 7 – Baseline data for the simulation of subsidies reforms (Direct effects)**

||||**Jan**|**uary 1st 20**|**Unsubsi**<br>**14**|||**Oct**|**ober 1st 2**|**Unsubsi**<br>**014**|
|---|---|---|---|---|---|---|---|---|---|---|
||**Unit**|**Type of**<br>**tarificat**<br>**ion**|**Unit**<br>**price**|**Unit**<br>**subsidy**|**dized**<br>**unit**<br>**price**||**Type of**<br>**tarificat**<br>**ion**|**Unit**<br>**price**|**Unit**<br>**subsidy**|**dized**<br>**unit**<br>**price**|
|**Gasoline**|L|Linear|12.020|0.780|12.800||Linear|12.800|0.000|12.800|
|**Diesel**|L|Linear|8.540|2.150|10.690||Linear|9.890|0.800|10.690|
|**Electricity**||||||**Electricity**|||||
|0-100|kWh|IBT|0.9010|0.6600|1.5610|0-100|IBT|0.9010|0.6600|1.561|
|101-200|kWh|IBT|0.9689|0.5900|1.5589|101-150|IBT|0.9689|0.5900|1.559|
|201-500|kWh|IBT|1.0541|0.5100|1.5641|151-200|VDT|0.9689|0.5900|1.559|
|501 and more|kWh|IBT|1.4407|0.1200|1.5607|201-300|VDT|1.0541|0.5100|1.564|
|||||||301-500|VDT|1.2474|0.3167|1.564|
|||||||501 and more|VDT|1.4407|0.1200|1.561|
|**Water**||||||**Water**|||||
|0-6|M3|IBT|2.3700|0.0000|2.3700|0-6|IBT|2.3700|0.0000|2.370|
|7-20|M3|IBT|7.3900|0.0000|7.3900|7-12|IBT|7.3900|0.0000|7.390|
|21-40|M3|IBT|10.9800|0.0000|10.9800|13-20|VDT|7.3900|0.0000|7.390|
|40 and more|M3|IBT|11.0300|0.0000|11.0300|21-35|VDT|10.9800|0.0000|10.980|
|||||||36 and more|VDT|11.0300|0.0000|11.030|

Source: Official Bulletins No. 6222, 16 January 2014 and No. 6288, 4 September 2014.

The poverty lines used for all simulations are 2,796 MAD/capita/year (316 USD) for rural areas and 4,266 MAD/capita/year (481 USD) for urban areas. These poverty lines have been estimated by updating the 2007 official poverty line for inflation. They are quite low for a country like Morocco today as they were in 2007 and they provide a pre-reform poverty rate of only 4.15%. Keeping this poverty line is important for interpreting our results using the official poverty line. However, what is of interest for the simulations is the relative percentage change in poverty which gives a better sense of the real impact of reforms on poverty. This percentage change will also be reported in the text.

# **5.1. Evaluation of the 2014 subsidy reforms**

In this section, we simulate _ex-post_ the impact of the subsidies reforms that Morocco has implemented between January and October 2014. These include the elimination of the subsidies on gasoline, the progressive increases on the price of diesel and the reforms of the electricity and water tariffs. Table 7 detailed the price increases and the restructuring of the electricity and water tariffs blocks relative to these reforms. These _ex-post_ simulations are useful in that Morocco has no new available micro data that can be used to evaluate the actual impact of the reforms. Even if these data were available, it would be very difficult to isolate the impact of the reforms from the impact of other shocks. This makes _expost_ simulations of this kind a useful tool to evaluate reforms.

We divide the analysis into direct and indirect effects. Direct effects are estimated using household budget data only. These are the effects on household welfare that are transmitted to households through price increases of subsidized products. Indirect effects are estimated by combining Input-output data with household budget data. These indirect effects capture the impact that price increases on subsidized products have on the prices of non-subsidized products and, through the latter, on household welfare.

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