Bloomberg
Morocco is considering sovereign bond sales of about $2 billion in late September as the coronavirus prompts it to increase its reliance on international debt markets, according to two people familiar with the matter.
The kingdom is pondering one issuance of 1 billion euros ($1.19 billion) and another of $1 billion, each with a maturity of at least five years, the people said, asking not to be identified because they’re not authorized to discuss the matter publicly.
The new Eurobond will either roll over or be used to redeem a previous issue that matures in early October, while the dollar-denominated sale will be used to build up the North African nation’s foreign-currency reserves, they said.
The amount under consideration is about double that Morocco was previously mulling for its return to the sovereign-bond market before Covid-19 hit. The $130 billion economy, which relies on tourism, agriculture and exports to Europe, is facing a 5% contraction in 2020, its first recession in decades.
A sale would add to $170 billion in emerging-market sovereign issuance this year in dollars or euros, already a record for the year-to-date period. Riskier issuers have been lapping up liquidity from unprecedented stimulus by the world’s most important central banks to fund their response to the coronavirus pandemic.
Finance Minister Mohamed Benchaaboun said this week Morocco is considering tapping the bond market from as early as September, without giving details. His ministry didn’t respond to questions sent by email.
Benchaaboun told reporters Tuesday that the government’s debt-to-gross domestic product ratio is projected to rise to 75% in 2020 from 65% in 2019. That surge reverses years of International Monetary Fund-backed debt reductions enacted after a spending spree to contain social unrest in 2011. It may take four years to stabilize this ratio before it’s reduced, he said.
Morocco’s dollar bonds have handed investors a 4% return this year. That’s the best performance on the African continent, where the nation is the only investment-grade issuer, and exceeds the 2.8% gain for the Bloomberg-Barclays EM Sovereign Bond index
The central bank last week said that Morocco will need to issue international bonds this year and next to maintain “a solid” buffer of foreign currency to cover a minimum of five months of imports.
(Adds background on emerging-market issuance in fifth paragraph, Morocco bond performance in eighth. An earlier version of this story removed an incorrect reference to last bond sale in fifth paragraph.)
