Faced with a “strong dollar” expected in 2025, Morocco is preparing for multiple impacts, ranging from higher energy bills to increased pressure on the compensation budget. But this increase could also benefit certain key sectors. Analysis…
With 46% of commercial transactions denominated in dollars compared to just over 50% in euros, the weight of the American currency in Moroccan foreign trade reflects the geography of international outlets for its economic operators.
The American currency weighs 40% in the dirham quotation basket. Its appreciation, predicted by the markets, will mainly impact the energy bill and the compensation budget. In response to a question asked on this subject, a former American Secretary of the Treasury (the equivalent of the Minister of Finance) in the 1970s, replied that “the dollar is our currency, but that's your problem.”
This joke still retains its relevance, including for Morocco, the weighting of the greenback in the dirham quotation basket being set at 40%. The slightest upward or downward fluctuation in the American currency impacts, in addition to the Kingdom's balance of payments, the State budget through compensation expenditure. Purchases of butane gas and soft wheat imports are, in fact, essentially denominated in dollars.
However, currency traders and foreign exchange market professionals all predict a “strong dollar” in 2025. Driven by the policy of the Federal Reserve and the announcements of Donald Trump, interest rates would remain at a relatively high level in the United States. United, boosting the attractiveness of the greenback among investors.
The euro fell on Thursday to its lowest level in more than two years against a dollar driven upwards by the upcoming return to the White House of Donald Trump, who plans policies likely to boost the inflation in the United States. Around 11:55 GMT of the same day, the European currency lost 0.23% against the greenback, to 1.0332 dollars per euro, after having plunged to 1.0314 dollars, its best level since the end of November 2022 against to American currency.
On the foreign exchange market, the greenback also strengthened against the British currency, which lost 0.51%, to 1.2453 dollars per pound, after a lowest since April 2024, at 1.2435 dollars per pound. . The USD/MAD rate was, for its part, increasing by +1.78% in 2024. This announced appreciation of the dollar is being monitored very closely at the Ministry of Finance.
According to its latest forecasts, an increase of 1 dollar in the price of oil would increase Morocco's energy bill by 1 billion dirhams, plunging the trade deficit even further. Furthermore, the volatility of agricultural commodity prices will affect the balance of payments, especially if the cereal season is still average, forcing the Kingdom to import large quantities of wheat to cover its consumption needs.
To keep its industry and its automobile fleet running, Morocco imports not only finished petroleum products in billions of DH, but also fuel, a lot of coal for ONEE power stations, gas and inputs paid in dollars.
At the Ministry of the Budget and at Bank Al-Maghrib, officials will scrutinize the evolution curve of the American currency, calculator in hand. Even a small appreciation of the greenback means more money to be allocated to subsidizing domestic butane gas, the largest item in the compensation budget.
On each 12 kg bottle sold for 50 dirhams at the grocer (85% of consumption), the Treasury pays more than 70 dirhams as a subsidy. The impact on the Treasury's debt service would be relatively limited, with only 1/3 of the outstanding debt being denominated in dollars.
According to the Foreign Exchange Office, 50.6% of the country's import-export is denominated in euros and 46.1% in dollars. Despite the rise in commercial transactions with the dollar zone in Asia since the mid-2000s, this mapping has not structurally changed.
Furthermore, we find the same picture in the country's external financing policy. The external public debt is 63.1% denominated in euros, and 36.1% in dollars and backed currencies. On the other hand, the appreciation of the dollar could put a little more pressure on foreign exchange reserves, with almost half of our imports being denominated in dollars.
With a slightly less favorable Dollar/MAD parity, companies buy their imported inputs at much better conditions and may fear the effect on their price competitiveness. But there are also some winners from the strong dollar advocated by Donald Trump. Indeed, 35% to 40% of Moroccan exports are denominated in dollars. The most concerned is the OCP group, the world number one in phosphates and derivatives. The more the dollar rises, the more its revenues would be consolidated. It is not the Treasury which would complain about this.
Raw materials: BAM forecasts
On the raw materials markets, the price of Brent is expected to maintain its downward trend over the forecast horizon, reaching $79.8 this year, $74.5 in 2025 then $69.1 in 2026. Concerning coal , its price would continue to decline in 2024, before recovering in 2025 and 2026.
As for natural gas, the World Bank's October projections for the European market indicate a contraction in prices in 2024 before a slight appreciation in 2025 and 2026. For foodstuffs, the FAO index is expected to record increases of 4.5% in 2025 and 1.2% in 2026.
Abashi Shamamba / ECO Inspirations
