Morocco Loses Investment Grade Status as Pandemic Pushes External Debt to Record Highs

Having "investment grade" means being able to access the international debt market under the best conditions. But since 2020, with the arrival of the health crisis, Morocco has lost its place in this prestigious category of countries. In April, it was the rating agency Standard & Poor’s that reduced the rating of Morocco’s long-term sovereign debt, denominated in foreign currencies and local currency, from BBB- to BB+, a level below investment grade, reports Mondeafrique. In its Morocco fact sheet, the American agency indicated that it was concerned about an increase in state guarantees that "could further exacerbate budgetary pressure", estimating that "fiscal consolidation between 2021 and 2024 will likely be slow".

Before S&P’s decision, it was Fitch rating that had lowered the sovereign rating of "Moroccan paper", painting a very negative picture of the Kingdom’s economic situation. And this week, it was Moody’s that lowered Morocco’s BA1 rating, but with a "negative" outlook. According to Moody’s analysts, it is in 2023 that the main drivers of Morocco’s economy will regain their pre-pandemic level.

Long before these unflattering news, Morocco has become very active in terms of resorting to external debt, the same source said, relaying the assessment of an expert. Finance Minister Mohamed Benchaâboun has made two consecutive fundraisings on the international market, including a billion euros in Eurobonds issued in September and $3 billion for a bond issue launched in December, allowing Morocco to take advantage of "good market conditions, marked by excess liquidity". With these loans and a few others, Morocco totaled 63 billion mobilized in 2020, according to statistics from the Treasury Directorate. Part of this windfall has been used to repay old credit lines.

However, the outstanding external debt of the Treasury has climbed, approaching 200 billion dirhams. This, added to domestic loans, has reached 77% of GDP. A figure that the kingdom will take time to bring back within the norms.