Fitch Ratings-London/Paris/Barcelona-16 January 2008: Fitch Ratings has today assigned the Urban Commune of Marrakesh (Marrakesh) Long-term foreign and local currency ratings of 'BB+' with Stable Outlooks. Fitch has also assigned Marrakesh a National Long-term rating of 'A+(mar)' with Stable Outlook.
The ratings reflect favourable institutional framework, including measures implemented by the state to monitor the local public sector's finances and a high probability of state intervention in case a local authority should run into financial difficulties. Further, they factor in the city's moderate debt in absolute terms and also relative to the level of current balance, as well as the importance of Marrakesh in the economy of Morocco. On the other hand, they also take into account the high rigidity of Marrakesh's revenue and expenditure and limiting manoeuvre room to substantially improve the city's budgetary performance.
The Stable Outlook takes into account the high co-funding from the central government in Marrakesh's investment programme and which should allow the city to reduce the need for recourse to debt. Fitch will also monitor any potential impact coming from a reform of the fiscal system in 2008, as well as the impact of the investment programme on Marrakesh's finances. Debt is likely to increase in the medium-term to fund capital expenditure, but possible delays in the execution of the projects make it difficult to quantify this increase.
Like all other local authorities in Morocco, Marrakesh's budgetary operations and debt are tightly controlled by the central government and by the FEC (a state-owned entity). Application procedures for new borrowing and the decision-making process are rather bureaucratic, and local governments must submit an exhaustive list of documents before they are authorised to borrow.
Nevertheless, estimated at MAD362m at end-2006, Marrakesh's debt remains rather moderate compared to its saving ability. Its debt represented only 1.7x of its current balance in 2006, which is modest by international standards. However, Fitch notes that Marrakesh's debt management experience is rather limited and there is limited visibility over medium-term cash flows.
Marrakesh is the capital of the Marrakesh Tensift Al Haouz region (with a population of more than 3 millions inhabitants) and also a service centre covering southern Morocco. The University of Cadi Avyad, which plays an important role in the national education system, has several campuses in Marrakesh. The Urban Commune has around 800,000 inhabitants, and is the third-largest city in the Kingdom of Morocco ('BBB-' (BBB minus)/Outlook Stable), and the capital of one of the most populated regions in the country. It is made up of five boroughs, which play an important role in delivering public services. Marrakesh's responsibilities include water and electricity distribution, public lighting, urbanisation and civil attendance, treatment of solid and liquid waste. The city receives significant transfers from the central government and the city collects revenues from a large number of different taxes.
A credit analysis on the Urban Commune of Marrakesh will be available on the agency's subscription website, "www.fitchresearch.com"
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Note to Editors:
Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(mar)' for National ratings in Morocco. Specific letter grades are not therefore internationally comparable.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
For more information, please contact:
Guilhem Costes
Barcelona
Tel: + 34 93 323 8410
Christophe Parisot
Paris
Tel: +33 1 44299134
Peter Fitzpatrick
London
Tel: + 44 (0)20 7417 4364
© Press Release 2008
