Only bold on paper? Morocco’s $73bn budget for 2025

The IMF thinks this trend will continue until at least 2030, with debt levels potentially rising to 88% of GDP in emerging economies and topping 134% in advanced economies. States such as South Africa, Brazil, the US, France, Italy, and the UK are particularly vulnerable to worsening debt burdens in the medium-term.

Morocco is seen as an emerging economy with moderate debt levels relative to GDP, combined with strong repayment capabilities and minimal risk. The cost of debt servicing in 2025 is estimated at $4.5bn, including $1.2bn for external debt and $3.4bn for domestic debt, according to the Budget's report on public debt (of which 70% is owed domestically and 30% owed to foreign financial institutions).

Credit rating boost

Recently, US credit rating agency Standard & Poor's upgraded Morocco's sovereign credit rating following its removal from the 'grey area' classification by the International Fiscal Association in Paris, a decision it attributed to improved macroeconomic indicators. 

Morocco aspires to regain its BBB investment grade rating, which it lost during the pandemic when the budget deficit surged to 7% of GDP, and a source in the finance ministry told Al Majalla that the current fiscal situation was "the best since the pandemic", with public finances and economic growth looking good.

Additional financing of $6.5bn is required for the next budget, which may be met through domestic borrowing to address any unexpected fiscal deficits. The country used a $3bn precautionary credit line from the IMF in 2020 to cover this deficit, which is expected to decline from 4% in 2024 to 3.5% in 2025, before reaching the target of 3% by 2026. The aim is to cut public debt to below 67.7% of GDP, compared to the current 70%, according to Budget documents seen by Al Majalla.

Ambitious growth target 

The 2025 budget projects a 4.6% growth in Morocco's GDP, up from 3.3% in 2024. This projection is based on an optimistic picture, in which the country produces seven million tonnes of cereals, hits 2% inflation, registers a 3.2% rise in external demand for its exports, benefits from stable energy prices, enjoys 3.7% growth in the non-agricultural economy, and gets a euro-to-dollar exchange rate of 1.08 (Morocco primarily exports in euros but imports in US dollars). 

Total exports amounted to $44bn, while imports reached $52.3bn in the first eight months of this year, resulting in a $9bn trade deficit. During the same period, Morocco received $8.3bn in remittances, $7.7bn in tourism revenues, and $2.6bn in foreign direct investments. Exports of cars grew by 7.6%, phosphates by 11.7%, and aircraft parts by 21%, while foreign investments increased by 55%. 

Around 12 million tourists visited Morocco between January and August of this year, but agricultural output dropped to 3.1 million tonnes of key cereals, a 43% decline compared on the previous season, which forced the Kingdom to spend $9bn on food imports, primarily wheat. By the end of the third quarter of 2024. Goods alone (excluding services) topped $90bn, with a $22bn trade deficit driven by rising external purchases.

Inflation and agriculture

The new Budget has suspended the collection of customs duties and value-added tax on certain food imports until the end of next year, allowing the import of red meat, rice, and olive oil to meet local consumption needs. This is to "reduce food prices and meet local demands, thereby controlling inflation," said Fouzi Lekjaa, speaking for the government. Inflation dropped from 6% to 1.1% this year. "Inflation is under control and remains significantly lower than in comparable nations," said Lekjaa.

Global inflation rates averaged 6.7% in 2023, 5.8% in 2024, and are projected to drop to 4.3% in 2025, according to the report, but food prices globally have risen faster than other consumer goods. Data from the Food and Agriculture Organisation (FAO) in Rome shows that global food prices reached an 18-month high in October, with a monthly increase of 2%.

Agriculture remains a cornerstone of Morocco's economy, employing one-third of the workforce and meeting 80% of the country's food needs, but climate change has significantly impacted crop yields in recent years. Cereal production, for instance, dropped from 10 million tonnes to a third of that amount last season. 

Despite this, Morocco's agricultural trade balance continues to register a surplus, particularly with European markets such as Spain, which sources 24% of its agricultural imports from Morocco.

Diversification and investment

Finance Minister Nadia Fettah Alaoui said the new budget "aims to increase growth rates by strengthening the foundations of a social state, stimulating investment and the labour market, continuing structural reforms, and maintaining fiscal balance."

These strategic priorities aim to accelerate development, diversify investment sources by boosting the share of domestic and foreign private sectors, and encourage public-private partnerships for major projects managed by the country's sovereign wealth fund. 

The strategy seeks to fund large-scale projects without burdening the public budget, while still building hospitals, universities, infrastructure, highways, railways, ports, airports, and sports facilities, according to a development model that aims to double GDP to $320bn and raise national income per head to $16,000 by 2030

The 2025 Budget allocates around $34.5bn to implement critical development projects such as large-scale Atlantic desalination plants on the Atlantic coast and building dams at a cost of $15bn through 2027. 

Key investment projects include expanding the high-speed rail network to Marrakesh, completing the Dakhla port in southern Morocco, green hydrogen and renewable energy sites, and new sports facilities and upgrades before the Kingdom co-hosts the 2030 FIFA World Cup with Spain and Portugal.

Read more: Bidders eye Moroccan rail as transformative $37bn project sets off

Modest social ambitions

For social policy, the budget allocates $3.8bn to support prices and purchasing power, while raising wages by $200mn. The government says it spent $11bn stabilising essential commodity prices between 2022-25, plus $2bn on the agricultural sector and $1.4bn to fund drinking water and electricity projects.

While these figures may seem significant to the Budget's authors, they are unlikely to make much difference to the life of the average Moroccan citizen. This highlights a common challenge of developing nations: how to overcome costly previous policy errors while building for a more prosperous and secure future in a rapidly changing world.