Morocco’s King Mohamed VI begins a tour of Gulf Arab states today, as the north African nation struggles with a financing crunch and what the IMF projects may be its second-biggest budget deficit in at least six years.
The monarch will begin his four-nation tour with a stop in Saudi Arabia, followed by Qatar, the United Arab Emirates and Kuwait, the royal Cabinet said in a statement. The trip comes a year after Morocco signed an accord with the six-nation Gulf Cooperation Council that provides $5 billion in funding over five years for development projects, according to the statement.
Morocco avoided the mass protests that swept through other countries in the region during the Arab Spring, largely by implementing constitutional changes and holding elections last November. Still, the nation faces growing problems after a drought hit its harvest and amid concerns about the economic fallout from the euro-region crisis. Europe is Morocco’s biggest export market and the source of almost two-thirds of tourists.
“Moroccan authorities are finding it more challenging to reduce the vulnerabilities created by the twin deficits in the context of a difficult external environment while maintaining Morocco’s traditional political and social stability,” ratings agency Standard & Poor’s said on Oct. 11 as it revised its outlook for the country’s debt to negative from stable.
Last week, the Rabat-based central bank cut the required reserve ratio for banks by 200 basis points, or 2 percentage points, to 4 percent because of the “scope and sustained nature of liquidity shortage in the money market and taking into consideration the outlook for liquidity factors.”
Morocco’s economy expanded 2.3 percent in the second quarter, its slowest pace since 2007, as the drought curtailed agricultural production, according to the state-run High Commission of Planning.
The International Monetary Fund, which in August granted the kingdom a $6.2 billion credit line, projects the country will run a budget deficit of about 5 percent of gross domestic product this year. The Arab Monetary Fund granted Morocco 1.64 billion dirhams ($190 million) in financing last month to help with its balance of payments and to support trade with other Arab nations.