With ongoing recovery efforts after the earthquake that struck Morocco three weeks ago today driving up higher public expenditure and widening fiscal deficits, international assistance could offset some reconstruction cost pressure, Fitch Ratings predicted on Thursday in a release.
The nationally recognized statistical rating organization also forecast a strong flood of external liquidity in the form of remittances from Moroccans abroad sending funds to help their families. With tourism operators reporting more postponements than cancellations, Fitch offered that tourism will remain a driver of the economy.
It noted that the authorities have set up Special Fund No. 26 to receive donations from individuals and local businesses, which will help fund the anticipated spending.
Morocco is pursuing a five-year rehabilitation plan for approximately 11.7 billion dollars (8.5% of Morocco’s GDP). Around 30% of this is earmarked for emergency relief, housing reconstruction and repairs, and the rehabilitation of damaged infrastructure, such as health and education facilities in affected areas.
It is unclear, however, what portion of the reconstruction expenditures will be borne by the Moroccan government, Fitch stated.
The government will finance the initiative using existing funds as well as a 2 bln MAD (USD195 Mln Dollars) contribution from the state-run Mohammed VI Fund for Economic and Social Development.
Prior to the earthquake, the government had expected to reduce the budget deficit to 4.5% of GDP in 2023 and 4% in 2024, though Fitch anticipated somewhat larger deficits of 4.9% and 4.4%, respectively, to account for the impact of inflationary pressures on spending.
The IMF reached a staff level agreement to offer USD 1.3 billion in long-term financing for climate resilience, but this was unrelated to the earthquake.