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Morocco's Budget Buoys Fitch Rating

by Lorys Charalambous,, Cyprus

14 November 2012

Moroccan Finance Minister Nizar Baraka has recently welcomed the decision by credit rating agency Fitch to maintain Morocco’s sovereign debt rating, notably the Issuer Default Ratings, at BBB with a stable outlook, insisting that this is primarily due to the fiscal measures introduced within the framework of the 2013 finance law (PLF).

Finance Minister Baraka highlighted the fact that the fiscal provisions contained in the 2013 PLF demonstrate the government’s firm commitment to reducing the country’s budget deficit, to implementing the necessary key reforms in terms of compensation, and to containing the volume of expenditure.

Baraka said that the international ratings agency had taken into consideration specific solidarity measures introduced within the framework of the social cohesion fund, providing for an “exceptional contribution” to be imposed for a period of three years on top income earners and on companies realizing large profits.

The exceptional contribution is designed to benefit the poor, namely those “most exposed to the crisis” in Morocco, the minister stressed.

The strengthening and the acceleration of the political transition in Morocco, in particular as regards the country’s new constitution, have contributed to Fitch’s decision to accord a “stable outlook”, Baraka added.

Fitch Ratings recently affirmed Morocco's long-term foreign currency Issuer Default Rating (IDR) at 'BBB-', long-term local currency IDR at 'BBB', and short-term foreign currency IDR at 'F3', noting that “the outlook is stable”. Fitch also affirmed Morocco's Country Ceiling at 'BBB'.

The ratings agency said: “Morocco's 'BBB-' rating is supported by a strong macroeconomic performance, as evidenced by low inflation, sustained GDP growth and general government debt (39% of GDP) in line with rating peers.”

It added: “Recent success in managing the political transition has underlined Morocco's political stability.”

Fitch continued: “Real GDP growth remained strong at 5% in 2011, supported by accommodative economic policies and structural reforms, and despite economic difficulties affecting Morocco's main economic partners in the eurozone.”

Fitch projects the budget deficit to decline gradually (4.8% of GDP in 2013 from 5.5% in 2012) in line with the recently announced budget and as subsidy reform progresses. General government debt would stay in line with rating peers between now and 2014, it added.

Fitch concludes: “The stable outlook anticipates improvement in the fiscal and current account deficits, consistent with Fitch's central scenario, supported by successful implementation of the subsidy reform and continued high growth.”

TAGS: Morocco | tax | economics | fiscal policy | budget | corporation tax | inflation | individual income tax

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