Morocco to return to international debt markets after two-years

Morocco is returning to international debt markets for the first time since losing its investment grade rating two years ago.

According to Bloomberg, with “its credit quality on the mend,” the kingdom is taking advantage of lower borrowing costs to replenish its coffers, after it expected to leave the FAFT grey list this month, which was announced this morning.

Morocco’s financial authorities plan to offer dollar bonds maturing in five, 10 or 12 years after hiring banks to hold a series of meetings with investors in the US and London starting Thursday.

Quoted by the American media outlet, Mark Bohlund, senior credit research analyst at REDD Intelligence in London, said record export revenues from state-owned fertilizer producer OCP have eased the pressure on government finances from rising subsidy costs for gas, electricity and wheat.

Optimism that Morocco will receive a line of credit from the International Monetary Fund also adds to its appeal, with the Washington-based lender and the World Bank scheduled to hold their annual meetings in Marrakech in October.

“There is an overall improvement in Morocco’s credit profile,” Bohlund said.

“It appears that a positive outlook by one or two rating agencies is within reach before the end of the year,” he added.

“This improvement in the North African kingdom’s credit dynamics stands in stark contrast to its regional peers,” Bloomberg points out, recalling that the last time Morocco issued a dollar bond was in December 2020, when it raised a record $3 billion.

“Investors have been willing to move down the ratings curve for lower-rated countries like Egypt or Mongolia, so a strong BB like Morocco should find a favorable reception from emerging market investors,” said Todd Schubert, head of fixed income research at Bank of Singapore.

The tourism sector’s recovery is also a key factor in this decision, as “receipts topped pre-pandemic levels last year,” details Bloomberg.

In addition, improved climate conditions bound to reflect on he domestic economy “have allayed fears of a second drought and eased concerns over growth in the euro area, Morocco’s main market for goods and tourists.”

Wali of Bank Al-Maghrib Abdellatif Jouahri indicated last June that, “discussions between the Treasury and the advisory banks are already underway to test the waters with international investors, to evaluate the conditions of loans on the world markets and to see how Morocco’s risk premium evolves in the current conditions.”

After the highest inflation recorded in the Kingdom in almost three decades, now affecting basic goods and services, the government is under more pressure to relieve living cost pressures.

Morocco’s decision to reintegrate international markets could be hindered by popular discontent over high and rising prices of vegetables, fruits and fuel.