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The €1 billion bond that Morocco issued on the international financial market last week will result in savings of nearly MAD 300 million (€27 million) per year, Minister of Economy Mohamed Benchaaboun announced.
Morocco will make the savings through reducing interest charges, Benchaaboun explained in an interview with business newspaper L’Economiste on Monday.
The bond that Morocco issued on September 24 will replace an old debt at an interest rate of 4.5% with a new debt at an average interest rate of only 1.7%, the minister said.
Morocco’s Ministry of Economy issued the bond with two €500 million tranches.
The first tranche has a maturity of 5.5 years, a price of 99.374%, and a rate of return of 1.495%, or a coupon of 1.375%.
The second tranche has a 10-year maturity, a price of 98.434%, and a rate of return of 2.176%, or a coupon of 2%.
The issued bond is “an excellent operation for our country,” Benchaaboun celebrated. He explained that the operation’s timing allows for saving more than 100 basis points compared to the bond’s initially proposed issuance in May.
If Morocco issued the bond in May, the Ministry of Economy would have paid a 3.1% coupon for a 10-year maturity. However, thanks to the operation’s timing, the country only has to pay a 2% coupon, the minister explained.
Macroeconomic advantages
Besides the yearly savings of nearly MAD 300 million (€27 million), the issued bond will allow Morocco to avoid drawing on its foreign assets to repay its debts and, thus, maintain sufficient foreign assets in the context of the ongoing COVID-19 crisis.
The recent operation will also allow the country to avoid altering domestic liquidity, which would have further worsened the current bank liquidity deficit.
Benchaaboun’s department consulted with four banks (Barclays, BNP Paribas, Natixis, and JPMorgan Chase) before deciding on when to issue the bond for optimal savings.
Despite the difficult context, Benchaaboun continued, the bond received favorable reactions from international investors. According to the minister, Morocco’s bonds are known for their “indisputable assets,” namely political stability, economic resilience, and a reputable track record.
Morocco is one of the few countries in Africa and the MENA region that was able to maintain a good investment reputation throughout the past decade, Benchaaboun concluded.
