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Morocco's Bold Leap into Derivatives Trading: Financing the 2030 World Cup Dream

Friday 07 June 2024 - 08:30

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As Morocco gears up to co-host the 2030 FIFA World Cup alongside Spain and Portugal, the North African nation is embarking on an ambitious plan to revamp its financial sector. In a move that promises to revolutionize the country's capital markets, Morocco is set to introduce derivatives trading this year, paving the way for increased investment and infrastructure development.

Nezha Hayat, head of the Moroccan Capital Market Authority, revealed in a recent interview in Rabat that the introduction of derivatives trading is part of the most extensive overhaul of financial regulations in the country in over three decades. This bold initiative is a critical component of the kingdom's broader strategy to expand capital markets and finance the substantial infrastructure projects required to host the world's most prestigious soccer tournament.

The urgency to secure funding for World Cup-related projects, such as high-speed rail links and state-of-the-art stadiums, has accelerated the need for these reforms. Currently, capital markets contribute only around 10% to the total financing of the economy, with institutional investors playing a significant role. However, the goal is to increase this percentage to an impressive 25%, according to Hayat.

To achieve this ambitious target, the Moroccan government is expected to introduce legislation this year that will pave the way for exchange-traded funds, currency-denominated investment funds, and Sharia-compliant investment funds. Additionally, the reforms will permit the establishment of investment funds dedicated to professional investors, benefiting from less restrictive constitutions and investment rules. Furthermore, the Moroccan stock exchange plans to launch a derivatives market before the end of the year.

Morocco recognizes the need to attract private investors and boost the small community of retail investors in the country, thereby raising the profile of the local financial market for foreign investors. Hayat emphasized that only a "tiny fraction" of the approximately twenty million bank account holders in Morocco currently invest in stock markets.

The Casablanca Stock Exchange, with a market capitalization of around $70 billion, is the largest in North Africa and the second-largest in Africa after Johannesburg. However, the country's annual GDP amounted to approximately $144 billion last year, according to the International Monetary Fund. Implementing the ambitious plan will require an investment of between 8% and 10% of that amount annually.

Banks acknowledge that they cannot solely provide financing for all the ambitious projects planned. The capital market reform will benefit some of these initiatives, including desalination plants, solar and wind parks, gas pipelines, highways, and industrial projects ranging from electric batteries to airports.

According to Prime Minister Aziz Akhannouch's statement to lawmakers in April, Morocco will need to spend a staggering 200 billion dirhams ($20 billion) on strategic projects as it prepares to host the 2030 World Cup. With this bold leap into derivatives trading and the overhaul of its financial sector, Morocco is poised to unlock new sources of funding and pave the way for a successful and unforgettable World Cup experience.