What’s up with the “two-speed” Morocco?
A read into Morocco's economy, a bit of context and other thoughts.
I debate Moroccan politics, economy and state of affairs fairly often. Other than having to accept that opinions differ, you get a chance to experience what fellow Gen Z’s & co. think about the country, its future and policies.
While the general anti-establishment & pessimist vibes are present no matter what, you can start noticing some repeating patterns or arguments brought up repeatedly.
Common examples of these somewhat vague arguments include corruption, bad policies, etc. But there is one slight problem to this, which one affect Morocco as a country badly to explain an X situation? you may have noticed these arguments get used a lot globally, but as a data nerd and a curious person this doesn’t cut it for me, sure the aforementioned arguments are still valid to some extent but does it really explain the entire story? I don’t think so, so what’s the Moroccan economy actually looking like, why is it the way it is?
Quick Notes:
- A “two-speed” Morocco here, is Morocco that looks overall in good shape but still has some serious problems.
- This article relies heavily on old, archived content.
Some turbulent history
✈️ Fasten your seat-belts because this is going to be quite the journey.
It’s the year 1973, most people remember it for the Yom Kippur war and subsequent oil crisis, it’s also where our story starts. Morocco at this point was being your average newly born modern state trying to make ends meet, until the 1973 war ended and its economic consequences started hitting.
During this period of the late 60s and early 70s, a sudden high demand for fertilizers had started mostly due to weather anomalies in the previous year, rising global food demand followed by high costs due to the oil embargo and a weakening dollar created an opportunity, a huge opportunity, you already know where this is going by now, it’s our favorite Office Chérifien du Phosphate (OCP). (nytimes.com)
Morocco - sitting on 3/4 of the world’s global reserves of phosphates (necessary compound for fertilizers) - unilaterally decided to raise prices to astronomical levels, up to 200%! other small countries like Nauru followed suit which made the price hike even worse as everyone wanted a share of the cake. (nytimes.com)
Yearly revenues at the time reached 1.5 billion USD, that’s 7 billion USD in today’s money! For comparison, OCP won’t reach these numbers again until well into the 2010s, that’s nearly 40 years later. Following the rise of OCP revenues, the government changed its entire economic plans based on this new flow of cash, OCP itself went on a spending spree alongside many government ministries by borrowing, launching projects and signing long-term contracts, Dubai style plans before Dubai even existed.
Emboldened by this - after all you don’t see newly independent states monopolizing commodity prices that often -, Hassan II launched a Moroccanization campaign in 1973, which forced all foreign companies to cede majority ownership to Moroccans similar to other nations of the region. The logic behind this is that Morocco was now an emerging power that can protect the sovereignty of its economy. (wikipedia.org)
During this period, Morocco was also pushing Spain into ceding the Sahara. The ICJ ruled in 1975 that Moroccan claims don’t fully translate into sovereignty over the territory, feeling powerful and also exploiting Spain’s weakness with Franco’s deteriorating health, Morocco just ignored the ICJ and launched the Green March that same year.
Ok, patriot? what does the Green March have to do with what will happen next?
Well as the Green March was unfolding and negotiations started with Spain, Phosphate prices started falling. The aforementioned chain of events blinded the Makhzen - Morocco’s state apparatus - into thinking this was just a temporary event and… Would you look at that the Spanish Sahara also has phosphates and we also got away with ignoring the ICJ ruling, so the assumption was that the effect of the price fall would be minimal! Besides, what’s the worst that could happen?
The plan was, do a peaceful demonstration into the Sahara, pressure Spain into capitulating and having some extra phosphate reserves and that’s it. At the time, U.S. intelligence assumed the possible danger was Morocco going to war against Spain and that eventually didn’t happen.
So what’s the problem here? Well, Algeria/POLISARIO didn’t like this new arrangement. Moroccan leadership at the time underestimated how far Algeria would go over this issue, according to de-classified CIA documents. So instead of a simple diplomatic nuisance, Morocco would end up fighting a war against the POLISARIO backed by Algeria and later Libya & Cuba, a war that’ll end up lasting 16 years! And remember phosphate prices were simultaneously falling too. (cia.gov)
Now back to the phosphates!
If you haven’t noticed it by now, this looks like an economic bubble but the reason no one recognized it at the time is because analysts didn’t know for sure if this is the new normal similar to crude oil or an actual bubble that’ll pop, we’re talking of a timeline of less than 4 years. For some perspective, the AI race is now nearing 5 years deep.
Skip to mid-1976 and Morocco found itself in a war against a militia backed by a petroleum state still benefiting from the oil crisis, a rising defense budget, an inefficient economy due to the 1973 policies that just started costing GDP growth, OCP revenues started collapsing - and if things couldn’t get any worse -, a sudden multi-year drought just hit Morocco - which seem to be a recurring theme throughout this country’s history - which tanked the agricultural sector. This led to a situation where the government borrowed too much, is fighting a war that losing or retreating will mean civil unrest and getting encircled by two hostile states, and can’t cancel those contracts without paying high cancellation fees that it couldn’t afford with revenue streams shrinking.
By 1983, the writing was on the wall and Morocco officially defaulted on its debt. The creditors did not like the fact that the country couldn’t pay back their money, so a harsh multi-decade austerity plan was on the menu for the Kingdom. (clubdeparis.org)
Was this preventable? In my opinion, I’d say it’s a low chance honestly. Morocco was still dependent on OCP and its phosphates and the agricultural sector. The bubble was also hard to distinguish from a new normal, since “If oil stayed the same price why not phosphates?” seems like a valid argument at the time. Saying “Morocco could’ve handled the situation better” without actually giving how is naive on my part and may as well be applied to current/past economic bubbles that happened later.
The aftermath
This may sound scary but don’t worry, it’s not; The worst of the situation was back in the 80s.
While the debt crisis was unfolding, Morocco was also losing badly in the war. The costs of the war were rising and the country was near economic collapse.
If you were wondering why the 1981 bread riots happened right before the debt crisis, this is why they happened and why the government responded harshly. Thousands were killed in the violence. This also coincided with intense purges - part of the years of lead - of the military, activists, elites, journalists and political opponents to make sure no one could abuse the dire situation for their own agenda. This was the point where the government couldn’t even suppress the protests while promising reforms, because it really didn’t even have the resources to even do anything. (nytimes.com)
The situation got so intensely dire, that the Ministry of education decided to kick students who failed their grade to reduce costs to an absolute minimum, you can see the consequences of that today for the education sector and other public sectors.
The U.S & France, seeing a strategic ally actively loosing a war and collapsing economically quickly intervened by using the Paris Club (a group of creditors) to renegotiate Morocco’s debt and provide some economic relief. However, the creditors did not want this to happen again - which for anyone who lends money in any scale is kind of fair -, so harsh austerity measures and economic reforms were enforced so the country can repay the debt and prevent it from happening again.
Morocco was also forced to start privatizing state-owned enterprises to cut expenditures and balance the budget. Honestly, in my opinion, this process was rushed and needed far more government resources - which as you might’ve guessed, were nearly nonexistent at the time -, notable examples include Office National des Postes et Télécommunications (ONPT) being separated into Poste du Maroc and Maroc Telecom, leading to the messy telecom sector we have today.
Notable figures who played a role implementing the changes during this period include the then Finance minister Abdellatif Jouahri, currently heading Bank Al-Maghrib, our central bank, and André Azoulay, the King’s economic advisor since Hassan II’s reign.
Morocco also reverted the Moroccanization policies and started opening up the economy, which together with the austerity plan stabilized the country and led to the economy rebounding strongly during the 1990s, by this time Morocco has largely settled or paid its debt but the effects of this crisis left a deep scar.
So what about now?
People largely attribute the economy rebounding to King Mohammad VI, which I completely disagree with. As you can probably tell by now the economic reforms were a multi-decade long effort that started showing its fruits beginning with the 2000s, with growth reaching 7% in 2001.
However, remember when I said austerity plan and limited resources? Well this had, in my opinion three nasty issues:
- Health sector
- Education sector
- Informal Market
Detailing each one is way beyond the scope of this article and will probably require another article detailing each. However, the general idea is that Morocco started the crisis at around 19 million people, by the 2000s it nearly doubled. So public spending dropped or stalled while the population was growing rapidly leading to over-stretched, under-staffed, under-equipped and under-funded public services well into the 2010s. The debt crisis also led to the informal market ballooning in size as the private and public sectors collapsed, purchasing power decimated and lack of government oversight and resources to solve the problems.
In addition, those subsidies that were supposed to be removed would take 30 years to be actually dealt with, most controversially the removal of fuel subsidies in 2015 and bankruptcy of SAMIR, and currently the now paused removal of butane gas subsidies. Yes, the effects of the debt crisis and austerity plan stretched way further than the 80s and early 90s.
And one consequence of the crisis and one that became government policy today, never ever rely on phosphate or any natural resource - including the agricultural sector which if you haven’t noticed didn’t cost us as much in the 2016-2026 drought which tells you a lot of how much changed in policy -, while still playing a huge role in exports, OCP doesn’t contribute as much as it used to back in the 70s despite record breaking revenues recently.
So are we doomed? By reading this you may think we’re doomed but looking at the numbers and the health of the economy, not at all! In fact we’re doing extremely well relative to our peers despite the crisis. While IMF/World Bank oversight is still strict and monitors spending on a yearly basis, the country has largely repaid its debt and is aggressively reducing its overall debt - now relying on domestic debt rather than foreign one - and has even built up significant foreign reserves especially in 2026, with a historical record this year.
Alright? How does that explain the “two-speed” Morocco?
Well, when you start from a terrible position and you need to skip a century of industrial development, what should you do? Replicate the Asian model of course. ✨
This is where things, understandably hit a massive snag, Morocco has very advantageous position for an Asian model industrial economy - like China, Vietnam and S. Korea-, but what it doesn’t have is either a fiscal cushion or even good starting conditions like literacy levels (Pre-colonial North Africa what can I say), and also remember to factor in the previous two sections we just discussed.
You may ask what do subsidies have to do with having industries like China does? Well, a country like China can artificially lower salaries relative to the dollar while still subsidizing necessities and using its state-owned banks to do the nation-building plumbing, Morocco has neither the subsidies, nor the state-owned companies capable of that nor an actual budget to achieve that - even if we include tax revenues of the informal market -.
Also remember how the population outpaced the formal economy and the education system faced cost cuts? Yeah this is where things get ugly really quickly, while Morocco fiscally and debt wise is doing impressively even for European standards and foreign investment and tourism is on the rise BUT it isn’t enough and it’s not on a large scale to sustain a healthy job market, besides the wages without subsidies problem is still an issue for the population, the government tried with Direct Social Assistance to help, it’s a good idea on paper, but in reality, it’s more like putting a band-aid on a bullet wound, because the Asian model requires direct subsidies not social assistance limited to the poorest 5% or so of the population because the latter ignores the huge amount of people living on low wages and can’t meet the criteria of the DSA.
Morocco is also not that self-reliant in terms of natural resources or energy which makes this problem especially acute since any global crisis hits us extremely hard, and with the current geopolitical climate, it does explain some of our current problems.
The “TL;DR” of the Moroccan economy in 2026, it’s trying to apply an Asian socialist state’s industrial model on a liberal free market economy with a constrained state budget, and you can already see where the problem is by reading that sentence.
What’s the solution? and conclusions
Morocco is in a catch-22 situation, we can’t afford the subsidies otherwise foreign creditors will refuse to lend the government a penny or we will lead ourselves into another crisis, and also our bond yields also rise and drop relative to government and economic policy, in simpler terms, bond yields is the value of the interest rate the government has to pay to borrow money. And if it rises it also erodes consumer and business confidence in the economy. Which reduces foreign investment.
In the other hand, we can’t drop the Asian model completely, because at the very least it’s providing a job, which helps the already high unemployment rate. We also happen to have some natural resources like cobalt and phosphates used in EV batteries and other industries. This economic model also brings foreign reserves, tax revenues which helps the government improve public services, we’re already starting to see some of this. I call this the “reversed economy”, bring the industry before the education system and local economy can produce an equivalent.
From what I can tell, this is probably the only path that sustains a Morocco-like country today. Is it a beautiful solution? No. It’s a messy compromise that tries to fix the disaster of the 70s and 80s while trying to sustain the demands of the 2020s while having the resources that all summed-up equal the health budget of Spain. While still not perfect, and with how much the press wants to make this country seem like it’s going to fall apart, we need to give credit where credit is due, we really did outperform ourselves here and we still in a way are!