Morocco expects to regain its investment grade in early October this year following new ratings from Fitch Rating and S&P, which according to Medias24 will change the trend that during 2020 and 2021 they had obtained, due to the consequences of the COVID.
Both agencies had withdrawn the Kingdom's "investment grade" rating, an indicator that international investors use to price the country's debt and assess the profitability or otherwise of buying the Moroccan National Treasury.
Both Fitch Rating and S&P had justified their valuations due to the effects of COVID-19 and the sharp contraction in Morocco's GDP in 2020. On top of all this, there is the budget deficit, a victim of the large social and health spending that the country had to undertake, and the spike in public debt.
These assessments were published in the midst of great economic uncertainty, but the current reality is that the direction of Morocco's economy in 2022 has improved to the point that the two international organisations are once again giving the Kingdom an "investment grade" rating.
The Moroccan Investment Department has played an important role in restoring it, as this will allow the country to attract international investment on very advantageous terms for the Kingdom.
Fiscal policy has played an important role. Morocco has managed to limit the financial damage that, especially after the consequences of the Russian invasion of Ukraine, had increased.
The country has managed to keep its public spending in balance, something very difficult due to all the problems it has experienced, but thanks to which by the end of this year it is expected to be less than that foreseen in the Finance Law.
"These budgetary actions, which are not easy to achieve in a context of crisis and soaring social spending, are likely to push the rating agencies to change their view on the future of public finances, the orientation of the deficit and public debt," says an expert on these issues.
"There is also an important element to take into account: the recovery of export sectors affected by the crisis, such as industry and tourism, as well as the strong improvement in transfers from Moroccans living abroad, which allow us to expect the current account deficit to be restored sooner than expected. All this speaks in favour of the recovery of the Investment Grade, because the elements that prompted the rating agencies to withdraw it are no longer relevant," adds the expert.
The resilience that Morocco and its economy have shown are, according to experts, more than enough for the Kingdom to regain "Investment Grade", which would encourage the country's Treasury to try its luck on the international markets where it could raise up to 4 billion dollars.
"Morocco's upgraded rating will undoubtedly make it easier for the Treasury to borrow internationally and on advantageous terms compared to other countries in the region. But this is not the only element in decision-making at the treasury level," explains an expert in sovereign debt markets.
"International rates are currently on the rise due to the decisions of the US Federal Reserve (Fed) and the European Central Bank, which have raised their key rates sharply and will continue to do so. Even with investment grade, an international launch may not be appropriate given this market context. So it will all depend on market conditions," he says.
Morocco is undoubtedly becoming a very attractive destination for international investment. Its financial strength and the country's great capacity to keep its economy afloat have shown that the Kingdom is facing a very promising future.