A lot of foreign investment, no doubt, but also a lot of public debt, far too much, 70.6% of GDP in 2023 according to the IMF. The kingdom could return there very soon. I’m talking about the international market… to get into debt again. Officially there is no panic, there is talk of diversifying sources of financing, consolidating foreign exchange reserves, and subsidizing mega-projects which will generate national momentum. So, is it reasonable when we know that interest rates are exploding on the global debt market?
The Minister of Economy and Finance, Nadia Fettah, who knows a thing or two about roadshows to bring in money, told Bloomberg that Morocco is seriously considering a new exit from the international market. Information released on May 6 by the Deputy Minister of Investment. The maneuver aims to ensure the country’s tax base and improve the investment framework to reach higher levels…
“ In addition to allowing the diversification of sources of financing and the strengthening of foreign exchange reserves, the funds raised could help finance national mega-projects, thus stimulating long-term growth,” said the minister, quoted by Les Inspirations Eco this Friday, May 24.
She does not doubt Morocco’s economic trajectory and financial posture to attract foreign investments. It is true that in 2023 the kingdom garnered $2.5 billion in foreign direct investment, an increase of 15% compared to 2022. This figure illustrates the confidence that the country inspires. And then there are the economic forecasts for this year, which are very good: Growth of 4% in GDP, driven by investments in infrastructure and industry.
What remains are the guarantees that foreign investors are waiting for on the tax reforms initiated and long-term economic stability. Furthermore, it should not be underestimated that an exit from the international market “ could increase the ratio of public debt to GDP and the cost of borrowing could prove high if market conditions were not favorable. This is in addition to the fact that rating agencies could find fault in terms of the perception of sovereign risk .”
Remember that the last international bond issue resulted in a collection of 3 billion dollars. The operation was met with enthusiasm from international investors, despite the global economic situation tormented by the Coronavirus pandemic. The funds collected were used to finance the economic recovery system and strengthen the public health system…
The loan should also make it possible to vary the country’s sources of financing to ultimately reduce the dependence of the National Budget on national financing and international aid. If we go back, it’s because something went wrong, it’s because commitments weren’t kept, it’s because the results weren’t there. So beware of the poison of debt, there is a threshold that the effective means of repayment cannot exceed, a burden that future generations will not be able to bear, especially in a global context that is impossible to define.
