These are the figures reported by financial news site Bloomberg, citing unauthorized sources. The objective of this exit would be, among other things, to consolidate its foreign exchange reserves that can cope with at least 5 months of imports.
The operation, planned according to Bloomberg, to be held towards the end of September, should take place in two stages. The country is therefore considering a sale of sovereign bonds of around $ 2 billion, following the impact of the coronavirus health crisis on the country’s economy and finances. A crisis situation which, according to sources familiar with the matter cited by the news site, has led the country “to depend more on international debt markets”.
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In detail, the first issue, worth 1 billion euros ($ 1.19 billion) will have a maturity of at least 5 years. This Eurobond will either extend a previous issue which matures at the beginning of next October, or redeem it, explain Bloomberg sources. The second issue, this time denominated in dollars, is expected to be in the amount of $ 1 billion. This should be used to (re) build up the country’s foreign exchange reserves.
This return to the sovereign bond market, if it materializes, was double what the country expected before the outbreak of the coronavirus crisis. This clearly indicates the significant impact of this health crisis on Moroccan public finances. With this crisis, the country is experiencing its first recession for several years (even decades). A contraction of the Moroccan economy of 5% is envisaged, especially since it is intimately dependent on tourism, agriculture and exports. Whole sections of foreign currency inflows (FDI, transfers of MRE) which have taken the consequences of the pandemic head-on.
This new sale of sovereign bonds would push all of Morocco’s outflows from emerging sovereign bond markets to $ 170 billion. This would in itself constitute a record for the annual cumulative over the period. However, Morocco is not alone in appealing to this market, given that the issuance of sovereign bonds has been a tool for several countries in their search for solutions to the crisis.
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The Minister of Economy and Finance, Mohamed Benchaâboun, had already announced the colors at a press conference on Tuesday, August 4 in Rabat, referring to the issue of bonds on its sovereign debt on international markets, without however, drop some amount. The press conference was devoted to the economic recovery plan concocted by the Ministry and its private partners. “Morocco is ready for this exit on the international bond market, and the government is only waiting for the right moment to issue its sovereign bonds in order to benefit from the best possible borrowing conditions”, he suggested.
Finally, this new exit will also increase the country’s debt from 65% to 75% of GDP in 2020. A leap that goes against all the efforts made by Morocco, under the watchful eye of the IMF, to reduce the country’s debt level, which swelled after “a series of spending aimed at containing social unrest in 2011,” Bloomberg said. According to Mohamed Benchaâboun, “It may take four years to stabilize this ratio before it is reduced”.
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As a reminder, in November 2019, Morocco had already raised at a “historically” low rate of around 1.5%, more than $ 1 billion. And Moroccan bonds have offered investors a 4% yield this year. According to Bloomberg, this is the best performance of sovereign bonds on the whole continent.
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