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Morocco’s Central Bank Caps its First Treasury Bond Purchases

A tourist buys locally-manufactured Argan oil from one of the stores in Moroccan Essaouira (AFP)
A tourist buys locally-manufactured Argan oil from one of the stores in Moroccan Essaouira (AFP)
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Morocco’s Central Bank Caps its First Treasury Bond Purchases

A tourist buys locally-manufactured Argan oil from one of the stores in Moroccan Essaouira (AFP)
A tourist buys locally-manufactured Argan oil from one of the stores in Moroccan Essaouira (AFP)

Morocco's central bank said on Thursday it planned to limit its first-ever liquidity-boosting purchase operations of treasury bonds to 25 billion dirhams ($2.5 billion), citing the dampening impact of market uncertainty over rate outlook on demand.

The central bank has so far injected 16.2 billion dirhams ($1.6 billion) through treasury bond purchases on Jan. 9 and Jan. 16.

The move comes amid lower demand for treasury bonds due to "fears of investors regarding the evolution of the benchmark interest rate," Younes Issami of the Bank's monetary policy and foreign exchange department told a news conference.

Morocco's central bank raised its benchmark interest rate in December by 50 basis points to 2.5 percent as it looks to curb inflation.

"Most investors have no visibility on the evolution of rates ... They preferred to wait rather than invest," he said.

The Moroccan central bank limited the purchases to bonds with less than a year maturity issued less than a month ago, he said.

Buying treasury bonds is a tool of "boosting liquidity without affecting the central bank’s monetary policy," Issami said.

Separately, Morocco is considering issuing an international bond in 2023 most likely in US dollars, he said.

Morocco hopes to regain its investment grade as it expects to leave the "grey list" of the Financial Action Task Force (FATF) which is currently visiting the country.

The bond issuance is not conditioned on the retrieval of the investment grade which Morocco lost in 2020, Issami said.

Foreign debt represented 15.5 percent of Moroccan gross domestic product in 2022 and is expected to rise to 16.5 percent in both 2023 and 2024, according to central bank figures.

Morocco's economic growth is expected to recover to 3.3 percent in 2023 after 1.3 percent in 2022, the High Commission for Planning expected Moroccan said last week.

"Uncertainties linked primarily to the progress of the war in Ukraine, interest rates, and epidemic and climatic risks" will decide how much the economy actually grows in 2023, Ayache Khellaf, secretary general of the HCP said at a press conference in Rabat.

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Ukraine Threatens to Halt Transit of Russian Oil to Europe

A view of storage tanks and pipelines at the Mero central oil tank farm, which moves crude through the Druzhba oil pipeline, near Nelahozeves, Czech Republic, August 10, 2022. REUTERS/David W Cerny/File Photo
A view of storage tanks and pipelines at the Mero central oil tank farm, which moves crude through the Druzhba oil pipeline, near Nelahozeves, Czech Republic, August 10, 2022. REUTERS/David W Cerny/File Photo
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Ukraine Threatens to Halt Transit of Russian Oil to Europe

A view of storage tanks and pipelines at the Mero central oil tank farm, which moves crude through the Druzhba oil pipeline, near Nelahozeves, Czech Republic, August 10, 2022. REUTERS/David W Cerny/File Photo
A view of storage tanks and pipelines at the Mero central oil tank farm, which moves crude through the Druzhba oil pipeline, near Nelahozeves, Czech Republic, August 10, 2022. REUTERS/David W Cerny/File Photo

A top aide to Ukrainian President Volodymyr Zelensky on Friday said Kyiv would halt the transit of Russian oil across its territory at the end of the year, when the current contract expires and is not renewed.

Mykhailo Podolyak said in an interview with the Novini.Live broadcaster that current transit contracts for Russian supplies that run through the end of the year will not be renewed.

“There is no doubt that it will all end on January 1, 2025,” he said.

Kiev says it is prepared to transport gas from the Central Asian countries or Azerbaijan to Europe, but not from Russia, as it is crucial for Ukraine to deprive Russia of its sources of income from the sale of raw materials after it attacked its neighbor well over two years ago.

The contract for the transit of Russian gas through Ukraine to Europe between the state-owned companies Gazprom and Naftogaz ends on December 31.

Despite the launch of Russia's full-scale invasion of Ukraine in February 2022, the Ukrainians have fulfilled the contract terms - in part at the insistence of its European neighbors, especially Hungary.

But the leadership in Kiev has repeatedly made it clear that it wants the shipments to end.

Meanwhile, the Czech Republic energy security envoy Vaclav Bartuska said on Friday that any potential halt in oil supplies via the Druzhba pipeline through Ukraine from Russia from next year would not be a problem for the country.

Responding to a Reuters question – on comments by Ukrainian presidential aide Mykhailo Podolyak that flows of Russian oil may stop from January – Bartuska said Ukraine had also in the past warned of a potential halt.

“This is not the first time, this time maybe they mean it seriously – we shall see,” Bartuska said in a text message. “For the Czech Republic, it is not a problem.”

To end partial dependency on the Druzhba pipeline, Czech state-owned pipeline operator MERO has been investing in raising the capacity of the TAL pipeline from Italy to Germany, which connects to the IKL pipeline supplying the Czech Republic.

From next year, the increased capacity would be sufficient for the total needs of the country’s two refineries, owned by Poland’s Orlen, of up to 8 million tons of crude per year.

MERO has said it planned to achieve the country’s independence from Russian oil from the start of 2025, although the TAL upgrade would be finished by June 2025.

On Friday, oil prices stabilized, heading for a weekly increase, as disruptions in Libyan production and Iraq’s plans to curb output raised concerns about supply.

Meanwhile, data showing that the US economy grew faster than initially estimated eased recession fears.

However, signs of weakening demand, particularly in China, capped gains.

Brent crude futures for October delivery, which expire on Friday, fell by 7 cents, or 0.09%, to $79.87 per barrel. The more actively traded November contract rose 5 cents, or 0.06%, to $78.87.

US West Texas Intermediate (WTI) crude futures added 6 cents, or 0.08%, to $75.97 per barrel.

The day before, both benchmarks had risen by more than $1, and so far this week, they have gained 1.1% and 1.6%, respectively.

Additionally, a drop in Libyan exports and the prospect of lower Iraqi crude production in September are expected to help keep the oil market undersupplied.

Over half of Libya’s oil production, around 700,000 barrels per day (bpd), was halted on Thursday, and exports were suspended at several ports due to a standoff between rival political factions.

Elsewhere, Iraq plans to reduce oil output in September as part of a plan to compensate for producing over the quota agreed with the Organization of the Petroleum Exporting Countries and its allies, a source with direct knowledge of the matter told Reuters on Thursday.

Iraq, which produced 4.25 million bpd in July, will cut output to between 3.85 million and 3.9 million bpd next month, the source said.