The drivers of Morocco's public external debt: empirical investigation (1998-2019)

Abstract

The objective of this study is to empirically analyze the determinants of external public debt in Morocco. The issue of external debt is linked to its place in the economic activity of any society. Thus, from an economic point of view, external debt makes it possible to break the link that should exist between savings and consumption within a country. However, despite this clear advantage, the problem is that debt can become dangerous when it exceeds certain limits. If it does not lead to a dislocation of a country's economic and social structures as a result of conditions imposed by lenders, it can at least thwart economic policy objectives and reduce policy space. Morocco has a long history, which was not always happy, with external indebtedness dating back to the pre-protectorate period. After the rescheduling of its external debt under the Structural Adjustment Plan, Morocco will reconsider its external debt policy. Indeed since its return to international financial markets in 1996, it will try to control the level of its external debt to avoid any drift that would lead it to relive the scenario of the 80s. In this context, this study analyzed, in the case of Morocco, the impact of a certain number of factors which are identified by the literature as being determinants of external indebtedness in emerging economies. Using data covering the period 1998-2019, analyzed with an ARDL model, our results show that external sector factors are preeminent in explaining the outstanding external debt of the central government in Morocco, leaving assume that the major concern of the public authorities is to maintain a certain balance in the external accounts.