The Morocco continues an encouraging trajectory in the management of its public debtaccording to the latest report of the International Monetary Fund (IMF). The country benefits from debt sustainability and the related risks are assessed as moderate. This assessment is based on factors such as the favorable debt structure, strong fiscal framework and continued reforms aimed at improving the country’s economic resilience.
With a ratio this/GDP which went from 71.5% in 2022 to 69.5% in 2023, the country demonstrates a capacity for resilience and budget management cautious. This positive development reflects strong nominal GDP growth of 10%, supported by a recovery in real growth to 3.4% and inflation measured by the GDP deflator reaching 6.4%.
The FMI projects that this debt-to-GDP ratio should continue to decline to reach approximately 68.3% in 2025, 67.2% in 2026 and 65% of the GDP by 2029. This trend is based on budgetary consolidation progressively included in the objectives of the government. The reduction of the debt is, moreover, facilitated by an increase in tax revenue (VAT, corporate tax) which supports the reduction of the budgetary deficit, projected at 4.3% of GDP in 2024, to 3.8% the following year and 2.9% in 2028.
In nominal terms, the central public debt is estimated at 1,016.6 billion dirhams in 2023, with an expected increase to 1,075.3 billion this year, 1,128.2 billion in 2025 and 1,340 billion dirhams in 2029, alongside an increase in the size of nominal GDP. The latter should reach 1,557.1 billion DH in 2024 and 1,850.5 billion in 2027 before exceeding the mark of 2,000 billion DH in 2029, at 2,062.9 billion.
However, the report highlights significant challenges related to financing needs. The latter increased from 14.6% of GDP in 2022 to 20.6% in 2023, mainly due to an increase in debt repayments. This pressure should ease from 2024, with a projection of gross financing needs representing 12% of GDP, then stabilization around 10% in the medium term.
Short-term risks remain relatively moderate, despite challenges related to contingent liabilities, such as retirement plans underfunded public sector and guarantees on this external of the public companies. However, prudent budget management and improved tax revenues, particularly through VAT and corporate tax, make it possible to contain these immediate risks. In the medium term, the situation remains favorable with deficit reduction projections and falling financing needs, which should stabilize the debt at a sustainable level. However, the country will need to continue to prepare for possible external shocks and manage guarantees on the debt of public enterprises, which remain potential sources of risks.
In the long term, risks are rated as moderate, although challenges such as climate change and demographics are factors to consider. THE Morocco is aware of these risks and has already launched significant reforms to address them, particularly in the water, health and pensions sectors, aimed at strengthening the resilience of the economy.
Furthermore, the structure of the Moroccan debt constitutes a notable asset. The country benefits from relatively long maturities and a low share of debt in foreign currencies, which reduces vulnerabilities linked to external fluctuations. However, interest payments are expected to increase slightly in the medium term as a result of rising domestic and international interest rates.
To consolidate these achievements, the FMI recommends targeted reforms, notably the introduction of a fiscal rule anchored on public debt and the strengthening of the medium-term fiscal framework. These measures aim to limit the risks linked to conditional commitments (obligations subject to the occurrence of a specific event), such as underfunded public pension plans, guarantees on the external debt of public companies, or even subsidized credits. granted during the Covid-19 pandemic.
Despite these challenges, the macroeconomic context remains favorable. Recent tax reformssuch as the optimization of VAT and the improvement of corporate tax, have made it possible to increase tax revenues and offset part of the growing expenditure. This prudent management has also helped maintain the confidence of international partners, strengthening the country’s economic stability.
In conclusion, Morocco seems on the right track to contain and reduce its level of public debt while ensuring rigorous management of associated risks. The IMF emphasizes, however, that constant efforts in terms of structural reforms and budgetary management will be necessary to sustain this dynamic and strengthen economic resilience in the face of external shocks.
Note that this report was published on November 25 following the completion of the second review of the agreement under the Resilience and Sustainability Facility for Morocco (approximately $1.3 billion approved on November 28). September 2023). The completion of the review allowed Morocco to draw down approximately $415 million, bringing total disbursements under the agreement to approximately $747 million.
Related News :