Morocco

Country Summary

Economic performance and outlook: Real GDP growth was estimated at 4.1% in 2017, a year in which the agricultural season was exceptionally good. In September, cereal production reached 96 million quintals, up from 33.5 million in 2016. Much of this growth was driven by increased value added from agriculture (which grew 16.1% in 2017). Non-agricultural value added grew more slowly (3.1%), but its growth was higher than in 2016 (2.2%), driven mainly by services and extractive activities. Real GDP growth is projected to reach 3.1% in 2018. 

Macroeconomic evolution: In 2017, Morocco continued its policy of fiscal consolidation that started in 2011. The budget deficit reached an estimated 3.6% of GDP in 2017, down from 4.1% in 2016, and is projected to be 3% in 2018. Foreign trade is expected to improve from 2016 as a result of lower wheat imports due to higher production and restrictions on imports and the evolution of exports resulting from new jobs in the automotive, aeronautics, and electronics sectors. Growth in exports (in constant prices) is expected to increase from 5.1% in 2016 to 6.6% in 2017 and to 6% in 2018. Despite the 30% increase in energy prices in 2017, growth in imports reached 5.7%, down from 7.2% in 2016, due to a 22% decrease in cereal imports. The current account deficit was an estimated 4% of GDP in 2017, down from 4.4% in 2016. This improvement is due to increased foreign direct investment (up 32% from 2016) and remittances (up 2%). Public debt decreased from 64.7% of GDP in 2016 to 63% in 2017. Inflation remains low at an estimated 0.9% in 2017. 

Tailwinds: Morocco has embarked on careful implementation of fiscal decentralization, a comprehensive reform of the civil service, strengthened oversight of state owned enterprise, and improved targeting of social spending to protect vulnerable segments of the population. The sectoral strategies launched in the late 2000s to transform the economy and strengthen its resilience are showing results. In addition to favorable weather conditions, the excellent performance of the agricultural sector in 2017 is linked to a 52% increase in the use of certified seeds (1.66 million quintals, up from 1.09 million in 2016) and the good performance of livestock, market gardening, fruit, and fisheries. The Green Morocco Plan adopted in 2008 made it possible to diversify the sources of growth and increase agricultural productivity, thereby strengthening the resilience of agricultural GDP. In 2017, a new investment charter replaced that of 1995, turning the National Pact for Industrial Emergence into an Industrial Acceleration Plan. The development of the automotive sector through the influx of foreign direct investment, joint ventures, and local industrial integration is starting to be reproduced in other sectors, including renewable energy. 

Headwinds: Despite improved GDP growth in 2017, the unemployment rate increased slightly, from 9.1% in 2016 to 9.3%, with a rate of 14% in urban areas compared with 3.2% in rural areas. Addressing pressing social issues may affect the government budget deficit, which stood at an estimated 3.6% in 2017.

Source: African Economic Outlook 2018

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 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

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