Morocco Faces 7.5% Budget Deficit Risk as COVID-19 Impacts Economy

The impacts of the coronavirus risk leading Morocco to a budget deficit. The main financial institutions are sounding the alarm, reports L’Économiste which notes that the extent of the impact of covid-19 will be known through the amending finance law. L’Économiste "anticipates a budget deficit of 7.5% of GDP" based on the projections of CFG Bank. But the newspaper specifies that for this, a public investment of 70 billion dirhams and a mobilization of 12 billion dirhams under the new financing mechanisms by the government are necessary. In addition, 3 billion dirhams in privatization revenues must be realized. The same source warns that if revenue forecasts are not met, things could be more complicated for public finances.

To fill the deficit, "the Treasury could accelerate its fundraising on the domestic market, with the risk of driving up rates". And "if the Treasury’s activity were to lead to a rise in rates, the central bank could deploy new measures to contain it", the daily points out. "Bank Al-Maghrib could also proceed with massive purchases of debt securities from financial players, on the secondary markets of Treasury bills and corporate bonds". This will allow institutional investors to increase their subscriptions in the primary market.

For the newspaper, "a competitive cost of money will be necessary to support the recovery". However, it turns out that the statutes of the central bank do not allow it to carry out this type of operation, it observes, while recalling Article 69 of the statutes of Bank Al-Maghrib which sets out the Bank’s prerogatives in this matter.