The Moroccan government has never stopped to continue the raising of foreign funds and at an increasing pace to meet the necessary and growing funding needs in this unprecedented health crisis in order to compensate for the effects of Dame Covid.
Since the latter appeared with the incidence and repercussions on state revenues, the executive to compensate for it, has borrowed billions of dirhams in dollars and euros from international banking institutions and issued bonds. debt in the international financial market. The latest of these foreign financings was in the amount of 7 billion dirhams denominated in dollars, with mandatory debt bonds having been issued last Tuesday on the international financial market.
This bond will be distilled in three tranches, the first for $ 750 million for a period of seven years at an interest rate of 2.375%, while the second is for $ 1 billion for a period of 12 years to an interest rate of 3%, while the third is $ 1.25 billion for a period of 30 years at an interest rate of 4%.
The Ministry of the Economy, Finance and Administrative Reform says that this “international loan will reduce the pressure on internal liquidity and give more space to finance the economic take-off in order to overcome the repercussions of the coronavirus which is currently raging in the Kingdom.
This large loan, the first of its kind in months, comes in view of the total cash requirements, for the 2021 commission, of around 120 billion dirhams. This is due to the impact of the health crisis on economic activity and the need to finance the post-Corona economic recovery plan.
Despite the exceptional circumstances in which the world is still living due to the coronavirus crisis, the issuance of external bonds by Morocco has met a strong demand, which is explained according to the Ministry of Economy and Finance. and the Administrative Reform through the political stability that prevails in the Kingdom, the reforms carried out by the State, in addition to the next economic recovery plan and the vaccination project against the coronavirus (Covid-19).
The government was supposed not to exceed the ceiling of 30 billion dirhams of external financing for the year 2020 under the finance law no.70.19, but after the outbreak of the coronavirus crisis, the government resorted to recourse upon breach of this legal obligation. According to the latest official forecast, the Treasury debt index to gross GDP is expected to drop to around 76% by the end of this year, having recorded a decline in the past year for the first time in around 10 years, to settle around 64.9%.
The reason for this expected increase in the Treasury debt index is the decline in economic growth due to the repercussions of the emergence of the Corona virus crisis, and the consequent increase in the budget deficit. Despite Morocco’s high debt level due to the need for additional financing, the government asserts that this will not affect debt sustainability, as its current structure remains intact.
The share of external debt represents 20% of total treasury debt, and most of the external debt is met on concessional terms, according to figures released by the Ministry of Economy, Finance and Administrative Reform. The average remaining repayment term is around 7 years at the end of the first half of the current year and the share of short-term debt is stable at around 13.2%, which reduces the refinancing risk.
Despite the government’s assurances, the risks are imminent in the event of the continuation of significant external borrowing, as the Supreme Council of Accounts and Bank Al-Maghrib had already warned on several occasions, which warned against the continued increase in the debt of the Treasury and called for continued work to keep Treasury financing conditions at favorable levels.