The global financial crisis is causing Maghrebi economists to rethink dependence on foreign sources of financing economic growth. As financing possibilities at the international level grow increasingly limited, Maghrebi economies must address the need to finance investment, without curbing the promising potential for a consumer society in the region. Algeria’s status as an oil exporting country is due to its relative independence from exterior financing. In 2009, Morocco and Tunisia could seek greater independent self-financing of their development by balancing investment with savings. Traditionally, these countries have had recourse to foreign liquidity via international loans, foreign direct investment and, increasingly, the remittances of workers living abroad. But a comparison between the investment and savings figures in the countries of the Maghreb reveals a significant gap between national savings and investment. If the difference is not yet a source of crisis, this is because FDI and remittances continue to fill the gap. The current crisis is already slowing down these flows and will continue to diminish them as the crisis continues.
As it is, FDI and remittances have certain intrinsic limits. FDI is designated to a specific country with a particular investment objective — it is therefore rarely adaptable to a change in situation and risks flight in the event of a significant transformation in the designated country. In the case of the countries of the Maghreb, businesses crowded to enter over the past several years to invest in textiles, call centers and other industries, as North Africa’s workforce proved it was ready to meet new challenges at lower costs. Remittances finance principally a growth in demand and imports of finished products. As for funds raised directly on the markets, these mainly concern large enterprises. These limits on foreign modes of financing pose no problems during a time of growth.
But in a time of crisis, Tunisia and Morocco should be shoring up savings as an alternative source of liquidity in order to carry out investments. Savings possess considerable advantages over other modes of financing. First, they reduce the risks of exposure to credits on the international level in the event of an exchange crisis. Second, saving protects the treasury and credit at the heart of an economy from global shocks. Third, spending savings reduces the power of foreign investors over the domestic economy.
The risk that the financial market crisis poses to Maghrebi economies proves that there are inherent risks in dependence on international liquidity. While international liquidity may support a country’s development, it should not be considered a principal vector of growth. In the framework of the current crisis, reliance on foreign liquidity must be reduced. Already, the crisis is limiting credit lines at the international level as large financial markets, in need of fresh money, seek to refinance. Analysts point to the case of the Eastern European countries, which have seen a portion of their private credit lines slow down, a trend expected to spread to other regions this year. Analysts also foresee a slowdown in FDI, while remittances and tourism already show signs of slowing down in the Maghreb region. These trends will persist until the global economic system recovers.
Tunisia and Morocco should therefore turn towards their existing savings and towards increasing their weak rates of banking penetration. Certain moves could be made to attract a higher number of deposits. Creating special accounts for small savings at reduced prices would be effective, for instance. Changing the status of microfinance institutions (MFIs) to allow them to collect savings may also be helpful. States could step up their national campaigns for the use of monetary instruments, by only accepting payments in checks or bankcards. Supplementing savings is indeed possible in Tunisia and even more so in Morocco. Close to 20 percent of Tunisia’s GDP circulates in fiduciary currency and this ratio is as high as 60 percent in Morocco. These liquidities could be brought to play a crucial role in the development processes of these two countries. A strong reaction by the Tunisian and Moroccan governments would enable them to avoid the pitfalls of the current crisis for 2009. Moreover, such long-term solutions could allow for the acquisition of savings, which could accomplish substantial projects without needing to rely on external financing. This would reinforce these countries’ international position, as well as their governing power. In other words, why turn to neighboring countries, with the risks and limitations in terms of political economy that this brings, if the country can find in its own borders what it needs to feed the economic machine?
