Morocco
| Pages | 143-152 |
Page 143
As an introduction to the description of public debt management in Morocco, it is useful to present some aggregates, illustrating trends in Morocco's public debt burden and associated charges.1
At the end of 2000, external public debt (direct and guaranteed debt) amounted to US$16 billion- equivalent to 48 percent of GDP or 121 percent of balance of payments current revenues. External public debt is distributed between the treasury's direct debt and guaranteed debt in the proportions of approximately 70 and 30 percent, respectively. Charges on the external public debt paid during 2000 amounted to more than US$2.5 billion, in other words, 19 percent of balance of payments current revenues.
The treasury's direct debt (domestic and external) at end-2000 amounted to the equivalent of US$25.2 billion, representing 76 percent of GDP, including US$14.1 billion, or 42 percent of GDP, in domestic debt.
The treasury's direct debt service amounted to US$3.7 billion, including US$2 billion in domestic debt and US$1.7 billion in external debt. Interest charges, which amounted to the equivalent of US$1.7 billion, absorbed 22 percent of current budget revenues.
During the period 1983-92, the Moroccan authorities concluded six rescheduling arrangements with the Paris Club and three with the London Club, entailing the rescheduling of US$12.7 billion (US$6.9 billion with the Paris Club and US$5.8 billion with the London Club). Morocco ended the rescheduling cycle in 1993.
The objectives pursued in the area of public debt management have been established in the light of the trends in Morocco's economic and financial situation and the constraints that the country has had to address. Accordingly, until the early 1980s, emphasis was placed primarily on raising the funds required to finance the central government's ambitious investment program. In this context and to offset insufficient domestic saving, the authorities relied substantially on the international financial market, where abundant liquidity was available with favorable interest rates. Page 144
With the outbreak of the debt crisis in the early 1980s, debt management objectives shifted substantially to reducing pressure on the balance of payments and the budget by rescheduling of debt charges, mobilizing concessional financing; and relying on domestic resources to cover the treasury's requirements.
Beginning in 1993, as Morocco's macroeconomic viability was restored, the authorities adopted a more dynamic approach to debt management, with the objectives of
- financing the treasury's requirements with optimized costs and risks through arbitrage between domestic and external resources, and
- reducing the burden and cost of existing public debt to sustainable levels.
Public debt operations, in terms of borrowing (domestic borrowing issues and external loan arrangements) as well as debt expenditure (payment of principal, interest, and commissions), are, like government revenue and expenditure, subject to the principle of prior authorization incorporated each year into the budget law.
The annual budget law voted by parliament therefore includes specific provisions authorizing the government to borrow externally within the ceiling of the programmed overall amount and borrow domestically to cover the treasury's deficit and cash requirements. Parliament also approves the budget appropriations required to honor payments of principal in connection with medium- and long-term debt and interest on all debt.
On the revenue side, the authorization to borrow is covered by two decrees accompanying the budget law, under which the prime minister delegates power for that purpose to the minister of economy and finance or his or her authorized representative to arrange external borrowing and provide government guarantees under the first decree and issue domestic debt under the second decree.
On the expenditure side, the minister of finance, who is the authorizing officer for settlement of domestic and external debt service, delegates powers to make scheduled debt payments to the managing units' officers.
Public debt management is the responsibility of the treasury and external finance department of the ministry of economy and finance. This department is responsible for
- meeting the treasury's financing requirements through mobilization of the required domestic and external resources,
- borrowing and payment of debt service,
- dynamic management of existing debt, and
- proposing legislative and regulatory texts and reforms relating to the treasury financing and the financial market in general.
At the external level, the treasury and external finance department establishes the external finance strategy and coordinates the tasks of negotiating and mobilizing the resources involved. The department is therefore responsible for negotiating financial protocols, mobilizing borrowing in connection with the balance of payments and structural adjustment loans, addressing issues related to on-lending, and providing guarantees for external borrowing. It also centralizes external debt data relating to the public and private sectors.
At the domestic level, this department's tasks consist of
- initiating domestic borrowing issues by supervising operations to issue treasury instruments and establishing the needed amounts to be borrowed, issue conditions, and redemption modalities;
- monitoring debt stock and repaying debt charges;
- processing records related to domestic central government guarantees; and
- supervising the program to modernize and reform the financial sector and initiate the relevant legislative and regulatory texts.
The role of Bank Al-Maghrib (BAM), the central bank, acting as financial agent of the government, consists of Page 145
- collecting drawings in foreign currencies in connection with external borrowing and supervising treasury instruments auctions (domestic issues), by crediting the treasury's current account for the dirham equivalents of external drawings and the amounts subscribed through the auction market; and
- making settlements on the basis of payment orders received from the treasury and external finance department for debt service in foreign currencies to foreign creditors, and in dirhams to local subscribers, by debiting the treasury's current account.
Last, a central depository, known as Maroclear, was established after the dematerialization of certificates of indebtedness (including treasury instruments). Maroclear is responsible for custody of treasury instruments and supervising settlement and delivery operations in connection with buying and selling of treasury notes on the secondary market.
Debt management is the responsibility of the treasury and external finance department, primarily through three divisions:
- Treasury operations division, whose tasks are to (a) prepare budget projections, monitor government finance equilibria, and determine the treasury's financing requirements; (b) mobilize domestic resources needed to cover financing requirements by conducting treasury instruments auctions; (c) propose reforms and measures to stimulate the market; and (d) process and monitor on-lending of external loans.
- External debt management division is responsible for (a) covering public external borrowing and settling central government debt service; (b) preparing debt statistics and analyses on debt, on a sectoral basis and in aggregate form (by country, sector, currency, and so forth); (c) analyzing debt and financial conditions for loans and formulating proposals to reduce debt service, debt stock, or both; and (d) implementing debt relief activities, such as refinancing onerous debt and renegotiating interest rate.
- Debt restructuring and international financial market division is responsible for (a) implementing debt relief and restructuring...
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