The ratings on the Kingdom of Morocco reflect limited flexibility on spending, high debt, and a weak economic structure. Supporting factors include improving macroeconomic stability and strong external indicators. Standard&Poor's Ratings Services expects that Morocco's policy response to the current difficult economic environment--with growing global commodity prices and high social demands--will be a fiscal loosening in 2008, slowing the pace of debt reduction and extending the horizon for Morocco's debt burden indicators to converge with those of higher-rated sovereigns. Specifically, we forecast that fuel and food subsidies, as well as public sector wages, will be kept above budget in 2008 in order to avoid social discontent. The central government nevertheless achieved a good fiscal outturn in 2007: The
