Morocco

Overview

Policy Watch

Morocco Monetary Policy Statement

21/06/2016

The monetary policy committee has decided to keep its key rate unchanged at 2.25%.

Morocco Monetary Policy Statement

22/03/2016

The monetary policy committee has decided to decrease its key rate by 25 bps to 2.25%.

Morocco Monetary Policy Statement

22/12/2015

The monetary policy committee has decided to keep its key rate unchanged at 2.5%.

Morocco Monetary Policy Statement

22/09/2015

The monetary policy committee has decided to keep its key rate unchanged at 2.5%.

Debt vs GDP / Bonds vs bills

All Data - Morocco

Year 2011 2012 2013 2014 2015 2016
GDP (billions US$) 99.07 95.73 103.72 116.81 - -
Total Outstanding Amount (Billion US$) 38.21 44.77 57.04 - - -
Bonds 35.95 43.50 52.26 - - -
Bills 2.26 1.27 4.78 - - -
Outstanding Amount/GDP (%) 38.56% 46.77% 55.00% 0.00% - -

Country Summary

The Moroccan economy consolidated its growth in 2013 with GDP rising 4.7% compared to 2.7% in 2012, despite the slowdown in world growth. This was due to a vibrant agricultural sector, in particular, with non agricultural activities somewhat less dynamic, compared to 2012. Overall goods exports were down by 4% because of a decline of almost 28% in exports of phosphates and their derivatives. The only exports to benefit from the recovery of external demand were capital goods, in particular electric cables and wires.

Sound macroeconomic and fiscal management continued into 2013. A cautious monetary policy held inflation at 1.9% and the current account deficit at 7.2% of GDP, compared to 10% in 2012, while foreign exchange reserves reached 4.5 months of imports of goods and services. The fiscal deficit, however, reached 5.3% of GDP. In response, the government undertook corrective measures to improve revenue collection and lowered public investment for 2014 with a view to bringing the fiscal deficit down to 3% of GDP by 2016. It should also be noted that the reform of the compensation fund and the application of an indexation system for petroleum products will be needed to achieve that objective.

Overall, Morocco’s performance has been encouraging and benefited from a context of political and social stability. The business environment has improved and the country has moved up eight places in the annual World Bank Doing Business report, climbing from 95th to 87th in one year. In addition, 2013 was marked by improved tourism revenue (+2%), transfers from Moroccans living abroad and a significant increase in foreign direct investment (+20%).

Despite these positive results and the overall economic improvement, Morocco has not been able to solve the problem of youth unemployment (ages 15-24), which reached 19.1% in 2013. For 2014, Morocco is going to continue to implement its reform programme (subsidies, taxation, retirement, social protection and the fiscal system), with two objectives: i) to improve the efficiency of public finances; and ii) to support the development of an inclusive growth model supported by the private sector and that generates jobs for young people.

Morocco has invested in targeted sectoral strategies to accompany these reforms and to accelerate the transformation and diversification of its economy, leading to more employment creation. The National Pact for Industrial Emergence (PNEI, 2009-15) aims to revive the industrial sector and to boost its competitiveness, and is thus an important framework for launching industries in which Morocco can be considered more competitive. From this perspective, the objective of creating 220 000 new jobs seems feasible for 2015. The new aeronautical and automobile industries represent an important source of economic growth and innovation for Morocco.

Morocco's banking system is one of the most liberalized in North Africa. Nonetheless, it is highly concentrated, with the six of the largest banks accounting for 85 per cent of the banking sector assets.

The Casablanca Stock Exchange (CSE), founded in 1929 and re-opened as a private institution in 1993, is one of the few regional exchanges with no restrictions on foreign participation.

The restrictions of Moroccan investors to invest abroad have helped the domestic market. However, recent changes in the Moroccan exchange regime seem aimed at allowing Moroccan investors to invest more freely into neighbouring markets. Hence, an increasing number of Moroccan banks have operations in North and West Africa.

Source: African Economic Outlook

Monetary policy & Public debt

The primary objective of Morocco’s Central Bank, the Bank al-Maghrib, is price stability. To meet this objective, in 2006, the multi-criteria analysis of inflationary risk was adopted as part of its monetary policy strategy. . The multi-criteria of analysis of inflationary risk includes the following indicators:

  • Aggregate demand
  • Pressure on the production capacities
  • Monetary conditions and asset prices
  • Import prices
  • Forecasts of inflation

Bank al-Maghrib actions aim to influence the interbank rate.

Although the objectives of monetary and fiscal policy differ, both require Treasury Bonds as key instruments to achieve their objectives. The Bank al-Maghrib issued the first government bonds in 2009 to compensate for the gap between government expenditure and government revenue. This trend continues till today. To fill this gap, the Ministry of Finance relies mainly on non-monetary funding, that is, bonds.

Thus, to meet its financing needs, and deal with the importance of repayments, the Ministry of Finance has significantly increased the volume of government bonds raised in the primary market, inducing a net debt position of more than MAD 5 billion. Moroccan government funding on the debt market is currently taking place in a context of declining wage rates caused by the strong demand of subscribers and lower money market rates.

The Kingdom of Morocco has not adopted an issuance strategy. However, there are 4 goals defining the debt management strategy:

  • to ensure a stable and sustainable funding to the Treasury
  • to reduce the cost of debt while minimizing the risks that are associated 
  • to promote arbitration between internal and external sources of funding
  • to contribute to the development of the market for Treasury securities

Market Structure

Instruments issued and Market participants

Instruments issued

Moroccan government instruments have several maturities:

  • Very short maturities (between 7 and 45 days)
  • Short term (13, 26 and 52 weeks)
  • Medium-term maturities (2 and 5 years)
  • Long-term maturities (10, 15, 20 and 30 years)

Market participants

The Bank al-Maghrib issues treasury securities n behalf of the Ministry of Finance. 

The investor base is well diversified in Morocco. 

The banks and insurance companies hold 52% of government debt, while the pension funds hold 31%. 

The foreign investors hold 16%. This breakdown of the investor base shows a strong appetite for Moroccan debt.

Primary and Secondary Market

Primary Market

Faced with a backdrop of unfavorable financing conditions and increased financing needs of the State due in particular to higher compensation expenses , the Treasury was forced to adapt its strategy and to focus on raising in short and medium maturities to meet market demand which was mainly focused on these maturities.

At the end of 2012, the use of Treasury auction market grew by 16 % compared to 2011 levels. And also due to the low supply of investors, the satisfaction of investors bid is established at 48% against 19 % in 2011. The rate of coverage of subscriptions by submissions, it is established at 2.1 in 2012 against 5.4 in 2011.

The volume of Treasury securities traded on the auction market totaled DH 120.3 billion against DH 103.5 billion in 2011, an increase of 16%.

These issues have focused on the less than or equal to 2 years maturity (excluding very short-term maturities) with a share of 51% against 63% the previous year.

The 2-year maturity alone totaled 31% of total Treasury issued, followed by the 5-year maturity 27%, 10-year maturity (15%), 13-week maturity (9%) and 15-week and 52-week maturity (7% for each maturity).

Regarding the exercise conducted on the very short term maturity, they have recorded a 21% share of the total raised against 4% in 2011. 

Secondary Market

Although the primary market experiences a lot of activity, the secondary market, on the other hand, is still illiquid. Most of the instruments issued are purchased for the purpose of a “buy & hold” strategy. The Ministry of Finance and the primary dealers are currently working on a solution to bring more liquidity. The solution could be the creation of a broker association with a specialised trading platform or the Casablanca Stock Exchange trading platform. 

Clearing, Settlement and Custody

Treasury bonds are dematerialized, and are subject to a registration account held by Maroclear under the names of market participating institutions. Maroclear is involved in the post trading over the counter (OTC) transactions.

The matching system of MAROCLEAR, called service X-Aparri, allows for continued recognition of symmetrical instructions of settlement and delivery, relating to transactions in OTC market, between two parties. The matching is done automatically based on matching criteria configured in the system (value, transaction type, amount...).

The system allows for matching of the following main categories:

  • the primary market operations
  • Repo-operations or sales in the secondary market
  • subscriptions / external redemptions of collective investment funds

Protection of investors

CDVM 

As the capital market authority, the CDVM ‘s (Securities Ethics Board) mission is to ensure the proper functioning, transparency, integrity and security of the Moroccan capital market. It is also responsible for ensuring the protection of savers and investors, by providing information on publicly listed companies and issuers.

Customer Guarantee Fund

The Dahir n ° 1-93-211 established a guarantee fund to compensate customers of brokerage firms in liquidation. This guarantee fund, to which companies are required to contribute, is managed by the CDVM. Commitments covered by the warranty, cover restitution to customers’ cash and securities deposited with the brokerage firms in liquidation, up to MAD 200,000 per customer.

Guarantee system of operations

The Dahir n ° 1-93-211 also provides a system of guarantees to brokers that allows to settle all the transactions in a defined period whatever the situation of their counterparts (default securities or cash default). Thus, each brokerage firm makes a deposit to Casablanca Stock Exchange to cover the net positions not yet closed.

Guide to Buying Bonds

 Procedures for market participation

Bids are received by Bank al-Maghrib, which provides an anonymous array of offerings and transmits it to the appropriate department of the Ministry of Finance, which sets the rate or limit the price of the auction. Submissions made at a limit rate or at a price greater than or equal to the limit price is met. Successful bids are allotted to the rates or prices offered by the underwriters.

Settlement of Treasury- bills subscribed takes place on Monday following the auction for instruments with maturities greater than or equal to 13 weeks. For the short-term securities, with maturities lower than 13 weeks, the settlement takes place the day after the auction.

Treasury bills can be issued with the same rate and maturity characteristics of previous issuances with the same identification code. In this case, the issuance will not necessarily be at par and for the settlement, the contractors pay, in addition to the price, the amount of interest accrued of the previous coupon date and the maturity of the T-Bill.

Treasury bills submitted by tender are traded OTC. The secondary market of Treasury bonds is also an OTC market. The buyer and the seller must declare each transaction on the secondary market to Bank al-Maghrib. 

Settlement cycle

The settlement of auctions occurs every Monday after each auction session. On the secondary market, the trades are matched and settled on the same day of the transaction, unless the parties agree to settle the transaction on another date. Once the trade is complete, market participants can send their delivery against payment instructions to MAROCLEAR. These instructions are supported in the matching system in real time. The matched instructions generate an irrevocable flow of receipt/ delivery, settled on the same day.

Taxation

The revenues from fixed income securities are subject to a withholding tax of 20% against the corporate tax and a withholding tax of 30% against the personal income tax. The top income tax rate is 38 % and the top corporate tax rate is 30 %. Credit institutions and leasing companies are subject to a rate of 37 %.

Rating

Rating AgencyCurrent ratingOutlook
Moody’sBa1Negative
FitchBBB-Stable
Standard and Poor’sBBB- Negative

Primary Dealers

Treasury bills subscribed by tender are registered in an account with Bank al-Maghrib on behalf of the Primary Dealers (PDs). The Primary Dealers are allowed to bid on their own accounts and on behalf of their customers. The PDs not only act as intermediaries between investors and the Treasury on the primary market, but they ensure the liquidity of the secondary market and advise the Treasury on the outlook of the market. 

As at 31 December 2012, the following institutions were designated as the PDs in the Moroccan market: 

Market restrictions

Openness to international investors

All persons resident or non-resident may purchase Government’s debt instruments. However several asset management brakes exist, making it  almost impossible to benefit from market opportunities. The management fees are too expensive.

Capital controls

Foreign investments are allowed, even if some arrangements have been set up to protect some business capital. Nevertheless, the government is trying to increase the participation of foreign investors. 

Restrictions on FX and profit repatriation

Foreign investors may convert the Moroccan Dirham for current account and/or capital account transactions. Some restrictions exist on the convertibility of the capital account. The conversion is allowed if the original investment is registered with the foreign exchange office.

In some instances, Commercial Banks do provide foreign exchange services on standard requests from foreign investors, without government approval.

Openness to international investors

All persons resident or non-resident may purchase Government’s debt instruments. However several brakes exist, as the management fees, making it  almost impossible to benefit from market opportunities.

Documents & Resources