A Moroccan senior official today disclosed that the country plans to sell at least a billion dollars in sovereign bonds (”probably in October”), to make investments in its justice system and expensive subsidy system.
According to a Reuters report, the source said: “We are not going to the international market because we want to cover expenditure. We want to do it for investment.”
This development comes shortly after the IMF granted the north African nation a $6.2 billion credit over a 2-year duration. The Moroccan government plans to use the funds to shore up its economy in the possible advent of an economic emergency or collapse.
Morocco’s economy is highly dependent on the credit-hit Eurozone but it believes the secured IMF credit would encourage foreign investors and lenders to lend to it favourably.
Reuters’ source also revealed that Morocco “may introduce some terms that can allow institutional investors from the GCC (Gulf Cooperation Council) to subscribe for around half the total” of the $1 billion sovereign bond.
Last year, Morocco’s fiscal and current accounts deficits were at a record-high after many years because the government was forced to increase public sector wage and subsidies to curb the revolts that characterized the Arab spring from surging within its populace.
Its agricultural output was also plummeted due to harsh weather conditions, therefore contributing to the shortage of cash in its domestic market, which is the country’s strongest creditor.
Worst is, its foreign currency reserves can not fund five months of subsidies.
According to Reuters, authorities have “promised to start reducing spending on subsidies, costs of which amounted to roughly the budget deficit last year, but indicated the process may take until 2016.”