Morocco`s good performance as regards debt management presented to the UN : 19/05/2012

Morocco`s good performance as regards debt management presented to the UN

The Minister of Economy and Finance, Mr. Nizar Baraka, highlighted, Thursday, May 17th 2012 at the UN, the significant fiscal reforms implemented by the Kingdom in terms of debt management.  

"Morocco carried out significant budgetary reforms that resulted in strengthening the stabilizer role of fiscal policy and safeguarding the sustainability of public finances," argued the official, who co-chaired a panel on debt and inflation sustainability.

In his speech during the roundtable, the second at the program of the UN High Level debate on economy and global finance, which opened Friday in New York, the Minister noted that apart from exceptional expenditure, the fiscal performance has significantly improved over the past decade.

The high levels of budget deficit, observed at the beginning of this period, declined, as well as public debt and the associated interest charges. For Mr. Baraka, who represents Morocco in this two-day meeting, this significant progress results from "the successful implementation" of several important reforms including the reform project of the Treasury`s financing strategy.

Indeed, the consolidation of fundamental balances made it possible "to control the Treasury funding so as to be consistent with the stability of the macroeconomic framework, which has reduced significantly the debt ratio and improved its profile and drive forward the reform programs including major projects. " he said.

He added that the ratio of the Treasury direct debt "has taken a downward trend over the last decade, from 67.1 % in 2001 to 52.9 % in 2011, a reduction of 12.4 percentage points of the GDP ".

The Minister stated that the improvement of the cost indicators continued with a downward trend of the debt interest charges that represent in 2011 only 9.7 % of the regular income against 17.2 % in 2001 and 2.2 % of GDP in 2011 against 4.4 % in 2001.

Given these figures, the debt ratio for Morocco is located around 30 %, he indicated, by attributing these performances to active management of foreign debt and the development of domestic debt market.

As to the active management of foreign debt, the choice of this approach by Morocco resulted in a decrease in the Treasury`s foreign direct debt ratio to 12.1 % in 2011 against 25.9 % in 2001 stressed Mr. Baraka.

This trend is due to lower interest rates on the international financial market and to active management of foreign debt, initiated in 1996, he added. He noted that the mechanisms used within the framework of this management focused on the cancellation and conversion of debt into private and public sectors investment, prepayment, refinancing of expensive debt and currency and interest rate swaps.

Moreover, the active policy of external debt management moved, in recent years, from reducing the volume and cost of debt to a stage where the emphasis is to covering fluctuations in interest rate and exchange rate risks. Regarding the development of the domestic debt market, Morocco decided in favor for "the development of the domestic debt market, the development and mobilization of domestic savings and contribution to the development of non-banking sectors."

And to conclude that "the risk associated with debt refinancing remains limited in so far as the short-term debt represents only 14 % in 2011 and that from the Treasury at fluctuating rates not exceeding 7 per cent of the total outstanding debt ".