Morocco’s budget gap reached MAD38.6bn ($4.43bn) in January-September, the same as the year before, but shrank 9% m/m as revenue rose faster than spending, the central bank said in its monthly report.

Higher domestic tax proceeds, coupled with inflowing GCC grants and financial packages, will continue to support Morocco’s fiscal parameters throughout 2014.

The primarydeficit also narrowed to MAD19.9bn in January-September from MAD21.5bn a year earlier.

The central bank is forecasting the budget gap to narrow to 4.9% of GDP in 2014 from 5.5% the year before. Late on Friday, S&P affirmed Morocco’s BBB-/A-3 ratings on improving fiscal and economic outlooks.

Total budget revenue grew 5.0% y/y (up 3.8% in August) to MAD176.8bn at end-September, while spending rose 3.9% y/y to MAD214.8bn, the central bank said.

Fiscal income increased 3.4% y/y to MAD151.5bn in January-September despite falling VAT proceeds (down 1.7% y/y to MAD56.6bn).

Non-fiscal income (excluding privatisation) climbed 18.3% y/y to MAD23.2bn, lifted mainly by GCC grant inflows. The latter jumped to MAD9.6bn at end-September from MAD1.5bn a year earlier.

Spending excluding subsidies rose 1.9% y/y to MAD178bn in January-September while current spending increased 7.9% y/y to MAD151bn on higher public-sector salaries. Spending on subsidies fell 19.6% y/y to MAD26.7bn whereas capital expenditures climbed 14.6% y/y to MAD37bn.

Debt servicing rose 9.6% y/y to MAD18.7bn in January-September amid rising domestic and external borrowing.

Morocco’s external debt grew 11.6% q/q and 12% ytd to MAD262.3bn at in Q2 this year lifted by the recently sold Eurobond. In June, Morocco sold a EUR1bn ten-year bond that was rated BBB- by Fitch, in line with the sovereign rating. The bond, whose proceeds will be used to help bridge the budget gap and repay maturing debts, has a coupon of 3.5% and spreads at issue of 233.5bps over German Bunds.