Morocco resorts to foreign debt to boost forex reserves

The Moroccan parliament has adopted a decree allowing the government to resort to unlimited foreign borrowing in order to ensure enough international reserves to fuel the economy.

Morocco’s trade balance has been chronically suffering from a trade deficit that has deepened in the first quarter this year due to falling exports as a consequence of fewer demand.

The decrease in remittances and tourism receipts bodes ill for Morocco’s reserves, which up to now covers 5 months of imports.

Lifting the limit on foreign borrowing is a necessary measure to ensure the Kingdom’s financial sovereignty, Finance Minister Mohamed Benchaaboun told MPs, noting that Morocco has an investment grade which helps it access international debt market in better conditions.

He said the $3 bln Precautionary Liquidity Line, offered by the IMF, was used by Morocco recently to boost reserves and will not have an impact on public debt as it is designed to ensure enough foreign exchange reserves for imports.

The Liquidity line was offered to Morocco in good terms, he said, recalling that Morocco has an amnesty of three years and will return the money at a 1.5% interest.

Morocco also geared a loan of 275 million to face natural disasters in order to mitigate the repercussions of the coronavirus, Benchaaboun said, adding that Morocco could resort to more debt depending on how the pandemic develops.

He reassured however that foreign debt represents only 20% of total treasury debt.