Bloomberg News

Morocco May Face Growing Financing Needs in 2014 as Debt Rises

June 19, 2013

Morocco’s financing requirements may rise in 2014 while its debt-to-GDP ratio is already approaching the “danger zone” after a surge in borrowings since 2011, the chief of the country’s planning agency said in an interview yesterday.

“The pace of borrowing we have seen since 2011 is reminiscent of the difficult years of the 1980s,” Ahmed Lahlimi, chief planning commissioner told Bloomberg News at the agency’s headquarters in Rabat. “We are getting closer to the danger zone,”

Last month, Finance and Economy Minister Nizar Baraka said the debt-to-GDP ratio stood at 59 percent in 2012 versus less than 48 percent in 2009. The North African country last month sold $750 million in dollar-denominated bonds.

The $100 billion economy is forecast to grow 4.6 percent this year after 2.7 percent in 2012, said Lahlimi whose 2013 forecast is below the central bank’s 5.5 percent estimate.

Ruled by the Arab world’s longest-serving dynasty, Morocco opened its coffers when protests started sweeping the region in 2011, raising subsidy spending, public-sector wages and pensions, leading it to post a 7.5 percent budget deficit in 2012, the highest in more than two decades.

Its current-account deficit hit 10 percent the same year, the highest since the 1980s when foreign lenders imposed a painful restructuring plan that stoked social pressure and led to the monarchy allowing greater political participation.

IMF Liquidity Line

Rabat was granted a $6.2 billion liquidity line by the International Monetary Fund last year. The government pledged to reform its subsidy, tax and pensions systems and bring the deficit down to 3 percent by the end of 2016.

Lahlimi said that a 25 percent reduction in subsidies would ratchet up inflation rate by 216 basis points. Consumer inflation stood at an annual 2.2 percent in May, he noted.

Morocco imports all its oil, gas and coal needs and relies on foreign sugar and wheat to meet domestic needs. Those imports accounted for 60 percent of the trade deficit in 2012, which stood at 197 billion dirhams or 23 percent of GDP.

Lahlimi forecasts the current-account deficit to ease to 6.8 percent in 2013 before rising again to 7.4 percent in 2014.

“It’s based on the assumption that no curbs will be put on consumption, that savings will not increase and that competitiveness will remain an issue,” Lahlimi said.

“Maybe a reform of subsidies can help, but so will a reprioritization of investments and letting the private sector play a bigger role in the economy, he said. ‘‘We have to reduce consumption to boost savings and compensate the decline in liquidity caused by growing deficits.’’

To contact the reporter on this story: Souhail Karam in Rabat at

To contact the editor responsible for this story: Andrea Snyder at

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