Strategic Policy Options to Improve Irrigation Water Allocation Efficiency: Analysis on Egypt and Morocco



For the Morocco case, cropping patterns changed appreciably for all three policies on LSI
irrigated land. Based on the model results, vegetable and fruit cultivation were significantly
affected because most of the vegetable and fruits are profitable exports in Morocco. More land
could be allocated to vegetable and fruit production if export of fruits and vegetables increased.
Cropping pattern changes were also observed on the PRI land on vegetable and fruits, and rain-
fed area on crops such as cereals, forages, and other industrial crops. Comparison on water
demand elasticity results in a relatively constant elasticity under different energy tax levels, and
the higher the output tax rate, the more elastic the output tax policy. Water pricing at the cost
recovery level was effective in limiting irrigation water demand in LSI irrigated land. The
change of overall welfare in the agricultural sector was positive under this policy. There was not
a strong response from the energy tax policy in welfare and irrigation water demand. On the
other hand, output tax on wheat and industrial crops on LSI irrigated land worked well in
decreasing irrigation water use while increasing welfare level.

Increased water prices, energy taxes, and output taxes generated extra revenue for the
Moroccan water agency and government. Water pricing at the cost recovery level increased
revenue by 50%. This level can be reached by an output tax as well at the 10% level. The energy
tax policy was not effective for generating revenue compared to water pricing and output tax
policies.

The major conclusions regarding to policy implications for Morocco are as follows: 1)
low level of energy taxation should not be used if the policy goal is to limit irrigation water and
generate government revenue; 2) the output taxation policy could be an alternative policy to
water pricing at the cost recovery level; 3) a higher energy tax or an output tax can also meet the
financial goals in terms of generating revenue for government or irrigation administration.

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