Morocco’s central bank has, for the first time, quantified the banking channel through which public financing crowds out credit to private companies. In its 2025 annual report, based on data spanning 2001 to 2025, Bank Al-Maghrib estimates that a one-point-of-GDP increase in public assets held by banks is associated, over the long term, with a 0.79-point-of-GDP decline in credit extended to private enterprises.
To illustrate the scale, a 10-billion-dirham increase in banks’ holdings of Treasury bonds and credit to public enterprises would be associated with roughly 7.9 billion dirhams less credit available to private firms, all else being equal — an illustration of the estimated relationship rather than an automatic effect of any single transaction.
The public sector’s weight on bank balance sheets has grown markedly. Credit to public enterprises rose an average of 9.8 percent annually between 2023 and 2025, with its share of total non-financial credit climbing from 6.7 percent in 2017-2019 to 8.4 percent in 2023-2025. Treasury bonds have also taken up more space on bank balance sheets, rising from 9.9 percent to 13.7 percent of assets; by the end of 2025, Moroccan banks held 287.2 billion dirhams in Treasury bonds, more than double what they need as collateral for central bank refinancing.
The report attributes part of the effect to “lazy banking,” in which banks favor liquid, low-risk public assets — easily used as collateral for refinancing — over private loans that require credit analysis and monitoring. Bank Al-Maghrib found that the diversification benefits of holding public assets are real, but not large enough to offset the net decline in private credit. High public investment can also crowd out private activity by absorbing labor and materials, a dynamic the report says is particularly visible in the construction sector.
The central bank stops short of questioning the need for public investment, which it says Morocco requires to modernize infrastructure. But it stresses that such investment must progressively pave the way for private-sector-led growth, supported by a clearer regulatory framework, more efficient courts, stronger contract protections and greater visibility for private risk-taking.
