Analysis of determinants of Morocco's sovereign financial rating[Analyse des déterminants de la note financière souveraine du Maroc]

The correlation between the sovereign credit rating granted by credit rating agencies (CRA) and conditions of access to foreign capital leads Moroccan authorities to pay greater attention to ratings obtained by Morocco. Understanding the determinants of Morocco's sovereign rating is critical given its implications for economic policies and structural reforms. In this perspective, this study examines the extent to which Morocco's sovereign rating reflects the performance recorded by its economic fundamentals and accounts for its sovereign risk. The aim is to identify a limited number of factors that can be the subject of the bulk of public action in order to reduce sovereign risk. The study included the case of the sovereign credit rating granted by Standard & Poor's (S&P). Using an ARDL model and monthly data covering the period 1998-2019, our study suggested that the Moroccan's sovereign rates, is determined by nine variables, namely: economic growth, depth of the financial system, inflation, accountability, control of corruption, budget balance, total central government debt, central government external debt and net foreign assets. The relationship between the variables is generally a short-term relationship, with the exception of the variables representing public finances. Moving from "speculative grade" to "investment grade" requires greater effort than what is normally required to move just along the path of "speculative grade". Our results can guide economic policy decisions in terms of the choice of sectors and factors that should primarily benefit from government efforts. Thus, given its long-term relationship and its predominance in the S&P's process of awarding sovereign rating, public finance factors must occupy the central place in economic policy, if Morocco wishes to consolidate its positioning at the Investment Grade, while moving away from the threshold separating it from the speculative grade. To our best knowledge, there are no academic studies that have attempted to examine the determinants of Morocco's sovereign rating. Also, from a methodological point of view, previous empirical studies have not had the opportunity to use an ARDL model to examine this type of relationship, i.e.: financial rating vs its determinants in the case of a specific country. Thus, our study can help demystify sovereign financial rating and its impact on the decision-making process relating to economic policies.