Struggling Morocco to implement austerity, seeks USD1b bond issue

19 Aug 2012

(MENAFN) Morocco is suffering the impact of the European debt crisis, as a slump in business with its main export partner and the costs of buying social peace amid Arab world uprisings are forcing the country to impose austerity measures in order to receive international financial assistance, Arab News reported.

The tightening-belt includes measures such as linking public sector salaries to performance, targeting subsidies more efficiently and improving tax collection.

Morocco was forced to ask help from the International Monetary Fund this month, winning a USD6.2 billion precautionary credit line.

The loan was granted to help Morocco cope with fluctuating energy prices and the effects of Europe’s economic troubles, the IMF said.

In exchange, the government promised to reform the pension system and a costly program of state subsidies for energy and staples.

According to government data, tourism income fell by 6.9 percent so far this year compared to a year earlier, and remittances from Moroccan expatriates dropped by 2.5 percent.

The country is also struggling with a drought and bad harvest this year, along with a saring oil bill as it largely depends on crude imports.

State reserves are only enough to buy 4 months’ worth of imports, way down from 11 months’ worth in 2005, according to the central bank.

Morocco unveiled plans to raise USD1 billion in a bond issue next month. Finance Minister Nizar Baraka said the government will tap dollar bond markets for the first time because Europe’s markets look too risky.