Casablanca – Morocco’s public debt has been on a steady rise, sparking debates about its sustainability and economic impact. With external debt reaching $28 billion by the end of 2023 and total public debt amounting to $133 billion (82% of GDP), the question arises: is Morocco overburdened by debt, or is it a necessary tool for development?
The debt landscape
According to the High Commission for Planning, Morocco’s public debt-to-GDP ratio stood at 83.3%, a figure that includes treasury debt as well as external obligations of public institutions and state-owned enterprises. The treasury’s domestic debt accounts for 75% of the total, while 25% is external, highlighting the country’s reliance on both local and international financial sources.
The composition of external debt is noteworthy:
- 51.2% comes from multilateral institutions,
- 20.9% from bilateral agreements,
- 27.9% from private financial markets.
Major creditors include the World Bank (30.2%), the African Development Bank (16.2%), and European partners such as France (11.8%) and Germany (7.6%). The U.S. dollar dominates Morocco’s external debt at 59.1%, followed by the euro (31.1%).
The cost of borrowing
The increase in debt has been accompanied by a rising debt service burden. In 2023, Morocco paid $1.5 billion in debt service, a 29% jump from the previous year. Interest rates have also climbed, exceeding 6% for private sector borrowing and surpassing 4% for official borrowing, up from an average of 1.5% between 2019 and 2022. This surge puts additional pressure on Morocco’s state budget, limiting fiscal flexibility.
Debt service reached $12 billion in 2025, nearly matching the country’s entire investment budget. Furthermore, with new borrowing estimated at $14 billion, the net capital inflow is a mere $2 billion, indicating that much of the new debt is being used to cover existing obligations rather than fund new projects.
Is there a critical threshold?
While debt is a fundamental financial instrument, the key concern is the threshold beyond which it threatens economic stability. Many global benchmarks, such as the Maastricht criteria, set guidelines for sustainable debt-to-GDP ratios, budget deficits, and inflation rates. However, achieving these targets remains a challenge for many economies, including Morocco.
Despite these concerns, Morocco continues to borrow, citing major infrastructure and economic transformation projects. Investments in roads, ports, airports, renewable energy, phosphates, automotive and aerospace industries, and tourism require substantial financing, which cannot be covered solely by domestic revenues.
The economic balancing act
The real issue is not debt itself but how effectively it is invested. If loans are directed toward productive sectors that generate sustainable revenue and job opportunities, they can be beneficial. However, inefficient allocation could leave future generations burdened with repayment without tangible economic benefits.
Indicators such as the ICOR (Incremental Capital Output Ratio) suggest that Morocco still has room for improvement in investment efficiency. Currently, 9% of GDP investment is required to generate just one additional percentage point of economic growth, signaling a need for more targeted investment strategies.
Preparing for the future: World Cup 2030 and economic strategy
With Morocco gearing up to co-host the 2030 FIFA World Cup, there is growing pressure to manage finances wisely. Large-scale investments in infrastructure, stadiums, and urban development will require significant funding, but policymakers must ensure these expenditures do not lead to excessive borrowing at unsustainable rates.
Finding the right approach
Rather than halting borrowing altogether, Morocco should adopt a strategic approach:
- Prioritize high-return investments that contribute to economic growth and job creation.
- Strengthen domestic revenue collection, including tax reform and anti-corruption measures.
- Leverage public-private partnerships to reduce reliance on external debt.
- Enhance fiscal discipline to ensure borrowed funds are used efficiently.
While Morocco’s rising debt is not necessarily alarming, its management is crucial. As the country navigates an ambitious economic transformation, borrowing should be a tool for development, not a long-term burden. Ensuring that investments yield significant returns will be key to maintaining financial stability while fostering economic growth.
