Macroeconomic performance and outlook
At 2.9%, real GDP growth in 2019 continued to decelerate. Water stress limited the performance of the agricultural sector, which involves about 46% of the active population. And growth was slow in the eurozone (76% of Morocco’s trade). But since 2013, there has been greater impetus in diversifying exports in global value chains—automobiles (up 13%), agrifood (8.2%), aviation (10.1%), and electronics (6%).
Since 2013, the secondary sector’s share of GDP has remained fairly constant (26.1% on average). The share of agriculture in GDP stagnated at 12.4% on aver- age, despite the Moroccan Green Plan, with its goal of promoting agriculture and linking it more closely to industry. The unchanging GDP composition reflects the low productivity of agriculture and industry.
Efforts to improve macroeconomic conditions in 2019 will continue into 2020 and 2021. Budget policy will aim to accommodate a fall in grants from the Gulf Cooperation Council (GCC), rising social spending for more inclu- sive development, and more rigorous and prudent debt management. The fiscal deficit, financed by the domes- tic market, dropped to 3.6% of GDP in 2019 and should fall to 3.3% in 2021 with better fiscal performance and spending controls. The debt of state-owned enterprises was estimated at 16% of GDP in 2018.
The restructuring of the debt portfolio with the GCC, which represented 4% of the treasury’s outstanding debt in 2018, is being expedited to limit the effects on currency volatility.
As a result of stronger real GDP growth, treasury debt, estimated at 65.3% of GDP in 2018, should fall to 65.1% in 2019, and to 63.1% in 2021. The current account deficit, 5.5% of GDP in 2018 due to the oil bill and capital goods imports, should fall gradually from 4.6% in 2019 to 3.9% in 2020 and 3.7% in 2021. Infla- tion is projected at about 1.0% for 2020–21.
Tailwinds and headwinds
The medium-term outlook remains positive, and real GDP growth should rebound to 3.7% in 2020 and reach 3.9% in 2021.
The country’s location can serve as a strategic hub for foreign companies looking to operate or set up busi- ness in Africa. The amended law on public–private part- nerships and the advanced regionalization policy offer new investment opportunities. But the agricultural sec- tor’s strong dependence on the climate could be a drag on growth.
The country faces three major structural challenges. First is developing human capital through education and training that correspond to the needs of the private sector. Second is rationalizing and optimizing the social protection system, which costs 3% of GDP, compared with 2% in other middle-income countries. And third is removing rigidities in the labor market to reduce youth unemployment.
Opening trade and services still controlled by state- owned enterprises to the private sector would promote competitiveness and reinvigorate the productivity of labor and capital inputs. And strengthening governance would increase the effectiveness of public activities and reduce spatial inequalities.
Health sector preparedness
The 2019 Global Health Security Index ranked Morocco 68 among 195 countries globally and 4 in Africa. It is thus one of the countries better prepared for a health crisis. The health sector is sufficiently prepared to treat sick patients and protect health workers. In addition, Morocco estab- lished a COVID–19 special fund, which allowed it to rap- idly acquire equipment and testing kits. Thanks to targeted grants, Moroccan businesses increased production of masks to meet domestic demand while exporting the sur- plus. The use of face masks is now mandatory.
A health emergency was declared on 20 March, and a curfew put in place on 22 March. The confinement order has been extended until 10 June. Thanks to the special COVID–19 fund, Morocco acquired 100,000 testing kits, 550 ventilators, and 1,000 intensive care beds, bringing the total number to 2,642. Field hospitals have been set up with support from the army. The Economic Watch Com- mittee (Comité de veille économique, CVE) has created social safety nets to support workers, including payments of a monthly allowance of 2,000 dirhams (around $203) to employees of struggling businesses and direct monthly assistance ranging from 800 to 1,200 dirhams ($81 to $216) for informal sector workers, distributed via mobile payments.
Measures to support smaller enterprises include the sus- pension of social security payments from 1 March to 30 June, a moratorium on bank loans and repayment of leases until 30 June, the establishment of lines of credit for struggling enter- prises with government backing up to 95% and at an interest rate pegged to the policy rate of the central bank, the sus- pension of tax payments for businesses reporting less than 20 million dirham in gross sales in 2019, and the suspension of customs duties on imported soft wheat until 15 June.
In March, the central bank widened the fluctuation band for the dirham to ±5% versus ±2.5%, which had been in force since January 2018, and reduced the interest rate to 2%. On 7 April, authorities withdrew all resources, amount- ing to $3 billion, from the Precautionary and Liquidity Line in the framework of the three-year agreement for 2018– 2020 with the International Monetary Fund. This with- draw offsets the weak mobilization of domestic resources and increased Morocco’s foreign exchange reserves to $25.5 million, 5.2 months of imports, and 303% of short- term debt repayments. Budget supports amounting to $792 million expected from other partners will make it possible for the government to honor its commitments and mitigate the negative effects of the pandemic.
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.
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.
There are nine (3M, 6M, 1Y, 2Y, 5Y, 10Y, 15Y, 20Y, 30Y) benchmark maturities for government securities in local currency (MAD).
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:
- Collecting data on transactions in the primary and secondary securities markets settled by Maroclear, Morocco’s Central Depository.
- Segmentation by residual maturity.
- Inclusion of recent transactions;
- 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.
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.
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.
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.
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 %.
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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:
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.
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
Documents - Ministry of Finance
- Loi_de_Finances_2017_Maroc.pdf (4.83 MB)
- Loi_de_Finances_2018_Maroc.pdf (6.13 MB)
- Loi_de_Finances_2019_Maroc.pdf (6.47 MB)
Documents - Debt Management Office
- Maroc_debt_2019_summary.pdf (663 kB)