IMF praises Morocco's actions to reduce public debt
Morocco's financial policies are bearing fruit. The ratio of public debt to the country's Gross Domestic Product (GDP) has not stopped decreasing since 2020, demonstrating the good work of the Alawi administration after the pandemic caused by COVID.
At 72.25% of GDP in 2020, public debt has been reduced by an average of more than one point per year to reach 68% in 2024. In the last year, debt has declined thanks to nominal GDP growth of 10% (3.4% real and 6.4% due to inflation).
IMF
According to International Monetary Fund (IMF) projections, the downward trend in Morocco's debt will continue until 2029. These projections suggest that Morocco's deficit will be around 64%, an exceptional figure, since, for example, the debt of countries such as Spain (105.30%) or Italy (137%) is more than double Morocco's deficit.
However, the IMF also notes that contingent liabilities, i.e. pensions and external debt guarantees, will be the ‘potentially most vulnerable’ items, although Morocco's debt structure remains strong due to long-term maturities and low ratios of foreign currency values that collateralise external debt.
Bank Al Maghrib
However, Bank Al Maghrib, Morocco's central bank, warned that rising global and domestic interest rates could increase indebtedness in the medium term. Faced with these circumstances, the International Monetary Fund recommends in its report that budgetary regulations be adapted to debt in order to strengthen fiscal frameworks.
According to the IMF on its official website: ‘Stronger fiscal institutions can encourage governments to stop overspending in good times, create a cushion to cope with bad times, and help countries provide credible fiscal guidance to reduce public debt levels’.
Spending reforms
Reforms in critical areas such as water, health and pensions are essential to ensure economic resilience in the face of adversity such as climate change and demographic pressures. These reforms are known as ‘spending reforms’ and seek to allow more to be spent progressively so that over the medium to long term these investments generate revenues to pay off debt.
The Moroccan government has work to do in the coming years because, although the trend is favourable, IMF and World Bank indicators advise that a country's debt should not be more than a third of GDP.