Morocco’s Public Debt: A Balancing Act Between Growth and Sustainability
Morocco’s Ministry of Economy and Finance recently released its “Outcome and Basic Assumptions of the 2025 Finance Bill,” shedding light on the country’s public debt trajectory. The report projects that by 2025, Morocco’s public debt will reach between 880.5 and 964 billion dirhams, a significant increase driven by the need to support economic growth and social programs.
This projection highlights the delicate balance Morocco, like many nations, faces between stimulating economic development and maintaining a sustainable debt level.
Debt Breakdown and Trends
The report reveals that the national debt reached 1016.7 billion dirhams by the end of 2023, marking a 6.8% increase compared to 2022 (951.8 billion dirhams). This follows a 7.5% rise observed between 2021 and 2022.
Delving deeper, the Treasury’s share of the debt reached 24.99% in 2023, up from 24% in 2022. Conversely, the internal debt share slightly decreased by 0.9 points to 75.1%. This suggests a greater reliance on domestic borrowing to finance public spending.
Internal vs. External Debt: A Closer Look
Internal debt, accounting for 75.1% of the total public debt, stood at 763.1 billion dirhams in 2023. This represents a 5.6% increase compared to the previous year. External debt, on the other hand, reached 253.6 billion dirhams, reflecting a more substantial 10.8% jump from 2022.
The report attributes this growth in external debt to several factors:
- Treasury borrowing: Increased borrowing by the Treasury to finance public expenditure.
- Debt of public establishments and local governments: Rising debt levels among public institutions and local authorities.
- Guaranteed debt: An increase in government-guaranteed debt issued by public and private entities.
Managing Debt for Future Growth
Despite the increase, Morocco’s debt remains manageable. The ratio of external debt to GDP is projected to stabilize at around 2.0 points in 2023, down from 71.5% in 2022. This suggests that while debt is growing, so is the national economy, mitigating potential risks.
However, the report emphasizes the need for continued vigilance. The Treasury’s external debt, in particular, has grown by 10.8% and now constitutes 30% of the total external debt. This highlights the importance of diversifying funding sources and promoting sustainable fiscal policies.
Looking Ahead: A Call for Sustainable Solutions
The projected increase in public debt underscores the need for proactive measures to ensure long-term economic stability. The report emphasizes the importance of:
Promoting inclusive and sustainable economic growth: This involves fostering job creation, attracting foreign investment, and supporting key sectors like tourism and agriculture.
Strengthening public finance management: Implementing efficient and transparent fiscal policies to optimize resource allocation and control public spending.
* Enhancing debt management strategies: Exploring innovative financing mechanisms, diversifying borrowing sources, and mitigating risks associated with external debt.
By addressing these challenges head-on, Morocco can continue its path towards sustainable and inclusive growth while effectively managing its public debt.
Morocco’s Public Debt: A Balancing Act Between Growth and Sustainability
Morocco’s public debt is projected to reach between 880.5 and 964 billion dirhams by 2025, according to the Ministry of Economy and Finance. This prediction, outlined in the “Finance and Development Prospects” report, highlights the country’s commitment to balancing economic growth with fiscal responsibility.
The report emphasizes that this debt level remains “sustainable” and is primarily driven by investments in strategic sectors crucial for long-term development. However, it also acknowledges the need for continued vigilance in managing public finances.
One key indicator of Morocco’s debt sustainability is the debt-to-GDP ratio. While the exact figures for 2023 are still being finalized, preliminary estimates suggest a ratio of around 69.5%, slightly lower than the 71.5% recorded in 2022. This suggests that the Moroccan economy is growing at a rate faster than its debt, a positive sign for the country’s fiscal health.
The composition of Morocco’s public debt is also noteworthy. External debt, owed to foreign creditors, is expected to reach 763.1 billion dirhams in 2023, representing a 5.6% increase from the previous year. Internal debt, on the other hand, is projected to reach 253.6 billion dirhams, marking a more significant increase of 10.8% compared to 2022. This shift towards internal borrowing could potentially offer greater stability and reduce exposure to fluctuations in global interest rates.
The Ministry of Economy and Finance attributes the increase in public debt to several factors:
- Increased investment in infrastructure projects: Morocco has embarked on ambitious infrastructure development programs, including investments in transportation, energy, and water resources. These projects, while essential for boosting economic growth and improving living standards, require significant upfront capital expenditure.
- Social spending and public sector wages: Maintaining social stability and supporting vulnerable populations are key priorities for the Moroccan government. This necessitates ongoing investments in social safety nets, healthcare, and education, contributing to public expenditure.
- Impact of global economic shocks: The global economic landscape has been marked by uncertainty in recent years, with the COVID-19 pandemic and geopolitical tensions impacting economies worldwide. These external shocks have put pressure on public finances, leading to increased borrowing needs.
Looking ahead, Morocco faces the challenge of maintaining a delicate balance between financing its development goals and ensuring the long-term sustainability of its public debt. The government has outlined plans to enhance revenue collection, improve public spending efficiency, and promote private sector investment to support sustainable economic growth.
However, the report also acknowledges the potential risks posed by rising interest rates and global economic volatility. Careful monitoring of these external factors, coupled with proactive fiscal management, will be crucial for navigating these challenges and ensuring Morocco’s continued economic progress.
