Morocco may seek external financing to counteract drought and inflation

The Moroccan government is grappling with managing public finances this year amidst drought and inflation, fueling expectations of rising domestic and foreign debt.

By the end of 2024, it is anticipated that financial needs will have surged to 110 billion MAD, of which 65 billion MAD will come from external financing.

New forecasts from the “Commercial Research Center” indicated an expected rise in treasury debt by 6%, to 1.086 billion MAD, while the external debt will increase by 19%, to 315 billion MAD.

This is despite positive results in public finances through February, with public revenues improving by 16%, to 50 billion MAD, and expenditures growing by 11%, to 60 billion MAD.

Bank Al-Maghrib predicts a decline in the agricultural season’s yield to 25 million quintals, with an inflation rate of around 2.2%; while the government is counting on intensifying support for farmers, boosting citizens’ purchasing power, and maintaining the balance of public finances to meet IMF credit conditions.

Under the 2024 Finance Law, budget deficit financing and treasury arrears are projected to hit 52.3 billion MAD, with cumulative treasury flows reaching 57.5 billion MAD by year-end, bringing the treasury’s gross financing requirement to 109.8 billion MAD.

Tax law and public finance expert Mounir El Mostari explained to Hespress that the Treasury will use 64.8 billion MAD from its general reserve for foreign market financing needs, and 45 billion MAD for domestic demand.

The expert highlighted stable bond rates, attributing that to careful treasury management and alignment of Bank Al-Maghrib’s key interest rate with February’s 0.3% inflation rate.

The Treasury’s strategy focuses on directing its financing towards external sources, aiming to keep the deficit at 62 billion MAD, or 4% of GDP, while treasury debt is expected to surge by 6%, reaching 1.086 billion MAD, which is relatively lower compared to last year’s 70.3% of GDP.

Rachid Qsour, a public finance expert, told Hespress that external debt is expected to reach 20.30% of GDP, up from 18.1% in 2023, while domestic debt will drop from 52.2% to 49.8% of GDP by year-end. He also expected external debt to increase by 1.4%, reaching 771 billion MAD.