Morocco shores up finances by choosing IMF deal over bonds

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Morocco has not issued an international bond this year due to market volatility and higher interest rates, opting instead for an International Monetary Fund (IMF) credit line to shore up public finances, the finance minister said on Tuesday.

Last time Morocco issued an international bond was in 2020 when it raised $3 billion.

“This year we have not issued an international bond because the market is volatile and investors lack visibility,” Nadia Fettah Alaoui said.

“The rates will be expensive, this is clear,” she said, adding: “When we have visibility we will tap the bond market because we have to safeguard Morocco’s good image” among investors.

Morocco is expected to access a new credit line with the IMF as it also explores “other IMF credit mechanisms,” she said without offering further data on the amount.

The government would also seek financing from bilateral and multilateral partners, while balancing between domestic and external debt to address financial needs that are expected to surge to 64bn dirhams ($5.8bn), she said.

In its 2023 draft budget, the government increased its budget to 600bn dirhams, up 15.4 percent compared to this year, planning increased spending on social safety nets, health, education and the army.

Overall, the government expects tax and customs revenue to increase by 14.5 percent in 2023, helping narrow the fiscal deficit to 4.5 percent of gross domestic product from 5.3 percent expected this year and reduce government debt to 70 percent of GDP, according to the draft budget to be approved by the parliament.

The government also aims for economic growth of four percent in 2023 from 1.5 percent expected this year, assuming an average harvest, and annual inflation of two percent.

Public investments will increase next year by 55 billion dirhams to 300bn dirhams.