Morocco

Country Summary

Macroeconomic performance

The economy continues to show resilience. Although slowing, real GDP growth was positive at an estimated 3.1% in 2018, down from 4.1% in 2017, reflecting less rainfall. The fiscal deficit, an estimated 3.9% of GDP in 2018, up from 3.7% in 2017, is expected to gradually shrink under fiscal consolidation, tax reform, the rationalization of public expenditure, and more effective collection of tax revenues. The medium-term economic outlook projects a continuing decline in real GDP growth, to 2.9% in 2019, before a rebound to 4.0% in 2020. The projected slowdown in 2019 is attributable to a slight decline in primary sector value added.

Tailwinds and headwinds

The introduction in 2018 of a floating exchange rate regime controlled within a band of ±2.5%, versus the previous ±0.3%, was perceived as a positive sign by investors and an important step toward wide flexibility in the exchange rate regime. In the first eight months of 2018, the dirham rose 1.9% against the euro and slipped 0.9% against the US dollar. Debt remains sustainable and is expected to decline over the medium term. The current account deficit was an estimated 3.8% of GDP in 2018, up slightly from 2017, reflecting primarily a rise in imports of oil and capital goods, while alleviated by tourism receipts and remittances.

Morocco has achieved remarkable economic performance over the past decade. The stock of core infrastructure has grown thanks to an average capital investment rate of 34% during 2008–18, compared with 29.8% in 2007, enhancing the country’s attractiveness to foreign direct investment. In agriculture, the main source of income in rural areas, productivity gains are still low despite the Green Morocco Plan aimed at boosting agriculture and stoking industry. The acuteness of water stress affects production and increases the volatility of farm incomes, leading to rural exodus.

Economic diversification into the automotive, aeronautics and electronics industries has been a core objective of the Industrial Acceleration Plan. These diversification efforts are expected to extend the agribusiness and service sectors and stimulate technology transfer and job creation. Its success will depend on, among other factors, the ability to implement human capital development policies that match the needs of the various productive sectors. Agriculture, which contributes substantially to combating rural poverty, has to be smarter and refocus on low–carbon footprint activities that leverage technology and innovation—critically necessary due to water scarcity. The improvement in the business environment must be continued to create real opportunities for boosting the private sector, even though authorities are creating enclaves of excellence around the country through special economic zones. Its overtures to Sub-Saharan Africa also offer Moroccan companies new opportunities. More effective and efficient public spending can create the necessary fiscal space to fund social and territorial development policies, and make growth more inclusive.

Source: African Economic Outlook 2019

Fixed Income

Summary 

The government securities yield curve extended to 30 years with nine benchmark points along the curve. 

Morocco is 8th in the ABMDI 2017 Ranking Report. 

Issuance strategy 

Ensure stable and sustainable funding to the Treasury and eventually reduce the cost of debt, while minimizing risks. Promote arbitration between internal and external resources (75% - 25%). Contribute to the development of the market for Treasury securities.

Benchmark issues 

There are nine (3M, 6M, 1Y, 2Y, 5Y, 10Y, 15Y, 20Y, 30Y) benchmark maturities for government securities in local currency (MAD). 

Yield curve 

Yield curve calculation models 

The yield curve is a reference for the market. It is built for the purpose of valuation of Moroccan financial assets. The calculation method used for Morocco’s benchmark curve consists of: 

  1. Collecting data on transactions in the primary and secondary securities markets settled by Maroclear, Morocco’s Central Depository.
  2. Segmentation by residual maturity. 
  3. Inclusion of recent transactions;
  4. Published rates are, for every term, weighted average rates per prices.

The yields are expressed in:

  • monetary rates for maturities up to 1 year. 
  • actuarial rates for maturities exceeding 1 year.

The auction method is used by the government of Morocco and some issues are reopened. 

Interpolation methods 

Where there is no traded yield for a certain point along the yield curve, interpolation is used to generate an appropriate yield. The linear interpolation is used in the case of Morocco. 

Yield curve managed by 

Morocco’s yield curve is generated by the Bank AL-MAGHRIB on a daily basis. 

Display platform 

The yield curve is available on two electronic platforms: Bank Al-Maghrib’s website, and Bloomberg. 

Challenges in building an efficient yield curve 

Lack of transparency in pricing: there are no quotations for government securities.

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 Agency Current rating Outlook
Moody’s Ba1 Negative
Fitch BBB- Stable
Standard and Poor’s BBB- 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

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