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Morocco sells bank stake amid spending push

Govt surprises market with bank stake sale; Sale comes amid concerns over budget deficit; Sale set to add to liquidity strains

May 24, 2011 10:29 by

Morocco aims to raise 5.3 billion dirhams ($662 million) selling a stake in a leading bank, at a time a spending spree to contain street protests has burdened its finances.

The finance and economy ministry said on Monday the sale of the stake in Banque Central Populaire , among the country’s top three lenders, will see the state giving up half its 40 percent stake in BCP to the latter’s regional branches known as Banques Populaires Regionales, which will end up holding 37 percent in BCP.

The sale, according to the ministry, aims to boost BCP’s development and to allow its regional branches to play a bigger role in the country’s plan to devolve powers to its regions.

Shares in BCP have been suspended from trading since Friday in the Casablanca bourse pending the Monday announcement.

“The suspension and the sale took many by surprise. But the price at which the regional branches are buying the BCP stake from the government offers neither a premium nor a discount,” said a Casablanca-based trader.

“But BCP’s regional branches will end up losing 5.3 billion dirhams in liquidity at a time when the latter is tight. The government could have sold the stake directly to investors in the bourse.”

By the end of March, the national budget deficit rose by more than 20 percent to 6.3 billion dirhams from 5.2 billion dirhams a year earlier. This was before the government introduced a wage rise for public sector employees this month.

Bank loans, including to the private sector, rose by an annual 4.7 percent during the first quarter while they were up 15 percent a year earlier. Loans to the treasury meanwhile rose 9.7 percent against a 1.1 percent rise during the first quarter of 2010.

As public protests demanding reform started in February, Finance and Economy Minister Salaheddine Mezouar told Reuters the state would need to sell some assets to keep the 2011 budget deficit at its targeted 3.5 percent. [ID:nN28282760]

Speculation at the time focused on a partial sale by the government of its 30 percent stake in Maroc Telecom , controlled by France’s Vivendi .

As the protests intensified and strikes multiplied, the government agreed to the multi-billion dollar package to raise wages for public sector employees, as well as the army and paramilitary forces, in a series of handouts aimed to prevent any spillover from revolts in other Arab countries.

At the helm of the Arab world’s longest-serving dynasty, King Mohammed in March promised constitutional reform to grant more power to the elected government and to make the judiciary more independent.

The constitutional reform will be submitted to the king for approval next month before a referendum is held in July, to be later followed by parliamentary elections before October.

Lahcen Daoudi, an economist and member of the main opposition party Justice and Development, said the BCP stake sale will not be enough to fill the budget deficit.

“This government does not have the right to deal with such structural issues since it is about to leave … This government is bankrupt,” Daoudi said. (By Souhail Karam; Additional reporting by Zakia Abdennebi; Editing by Adam Tanner)

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