Morocco central bank cuts interest rate, sees inflation falling

(Adds government debt, paragraph 8)

RABAT, June 25 (Reuters) - Morocco's central bank cut its benchmark interest rate by 25 basis points to 2.75% on Tuesday, saying the decision was consistent with a drop in inflation.

Inflation is expected to fall to 1.5% this year, from 6.1% in 2023 due to lower food prices and easing external pressures, the bank said in a statement after its quarterly board meeting.

It said inflation would tick up to 2.7% as Morocco began a gradual cut of cooking gas subsidies.

A drop in farming output would lower economic growth to 2.8% this year, from 3.4% last year, the bank said, adding that growth is forecast to improve to 4.5% in 2025, assuming an average cereals harvest.

Morocco's current account deficit is expected to widen to 1.7% of GDP this year, up from 0.6% last year, it said, citing an increase in energy imports.

The North African country's foreign exchange reserves would stand at 382 billion dirhams ($38.4 bln) by the end of this year, enough to cover 5.5 months of import needs, it said.

The fiscal deficit would remain at 4.4% of GDP this year as higher tax revenue offset additional spending on safety nets and salary hikes, the bank said, forecasting a narrowing fiscal deficit to 4.1% of GDP next year.

Government debt is expected to expand to 70.1% of GDP this year, from 69.5% last year, it said, noting that external debt would represent 17.6% of GDP this year and 18.2% in 2025, or nearly 300 billion dirhams ($30 bln).

(Reporting by Ahmed Eljechtimi; Editing by Alison Williams, Alexander Smith, William Maclean)