US Rating Agency S&P Assigns Morocco ‘Junk’ Credit Rating


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Rabat – US rating agency S&P has downgraded Morocco’s local and foreign currency credit rating to ‘junk,’ from BB+ to BBB-. 

The for-profit US rating agency claimed that Morocco’s current economic contraction and the corresponding growing budget deficit are to blame for the downgrade. The new rating means that Morocco now has a high-yield non-investment grade that could impact the country’s finances in the near future.

S&P’s downgrade comes after other for-profit US rating agencies, Moody’s and Fitch Ratings, gave Morocco’s credit rating similar downgrades in recent months.

The new rating covers both Morocco’s foreign currency credit rating and its local currency credit rating. A foreign currency credit rating takes into account economic factors to determine how capable a country is to repay debts using foreign currency, typically in euros or dollars. 

The local currency rating refers to a country’s ability to repay debts using local currency, in this case, the Moroccan Dirham.

Read also: Two Morocco-Related Investment Funds Receive “Speculative” Rating

The reason for S&P’s downgrade is related to the global economy as well as domestic factors such as increased spending. Ever since Morocco announced it would increase spending on social benefits such as universal healthcare and expanded pensions, downgrades by US rating agencies have slowly undermined its ability to gather funds abroad.

Even though S&P reduced Morocco’s foreign and local currency credit rating, it improved the country’s outlook from “negative,” to “stable,” leading to the conclusion that Morocco’s ambitious social services plans are weighing on the decision.

S&P announced in its press release that Morocco’s “budgetary consolidation over 2021-2024 is likely to be slow.” Budget consolidation typically refers to cutting a nation’s debt or spending in order to reduce interest payments as a share of GDP.

While Morocco is undoubtedly facing economic issues, like the rest of the world, the three for-profit US rating agencies have a tendency to create a self-fulfilling prophecy. By downgrading a country’s rating the agencies make it harder for countries to gather capital, meaning they pay higher rates which in turn can make the agency’s prediction a reality.