IMF grievances in Morocco for a resumption of growth

After concluding its consultations under Article IV of its statutes with Morocco, the International Monetary Fund presented its final report on the assessment of the situation of the Kingdom’s economy and the prospects for exiting the recession due to the covid-19 pandemic, in an unfavorable international environment.

Response to the pandemic: the Kingdom is doing well financially

According to experts from the International Financial Institution, Morocco has resisted the devastating effects of the pandemic which caused a recession of around 7.2%. This is due to the accommodating monetary policy conducted by Bank-Al-Maghrib which was able to ensure stable financing of the economy. The central bank had to keep the key rate at a very low level (1.5%), thus helping to support the banking sector in financing businesses. Similarly, Morocco has been able to preserve its financial sustainability by controlling its level of indebtedness, which it has proven by repaying its debt to the IMF in advance for an amount of almost billion dollars. On the other hand, the financial situation of the Kingdom is considered comfortable in the short term given the sufficient stock of foreign currency reserves which cover seven months of imports.

The pandemic continues, its effects too

However, the IMF has warned the Kingdom against a very harsh exit from the recession caused by the pandemic, which may last longer than expected because of the lack of visibility on the vaccination campaign and its ability to completely eradicate the virus. . This climate will weigh heavily on the resumption of growth, estimates the fund’s report knowing that Morocco could not regain the level of GDP of 2019 until after 2022. The persistence of the pandemic and therefore restrictive measures would not fail to slow down domestic demand and in particular public investment, because of the need to reduce public expenditure to ensure the reduction of external indebtedness. Private investment in its turn would not fail in its conditions to tumble because of the foreclosure effect (the financial markets would be more inclined to finance the State in its recovery plan, which would deprive businesses of access comfortable in credit). This scenario remains linked to the hypothesis of the persistence of the health crisis and the restrictions it imposes. Added to this is the stagnation of demand and in particular consumption.

Heavily dependent on its international environment, Morocco could face an unfavorable international situation, marked by a drop in external demand, the risk of protectionism and that of the relocation of some European industries on which the Kingdom depends in its industrial policy.

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The ways out of the crisis: the IMF’s complaints

Despite all these constraints, Morocco retains several emergency exits to quickly emerge from the current economic crisis, say IMF experts. The latter recommend a budgetary policy geared towards supporting businesses and preserving jobs through rescue plans and guaranteed loan mechanisms. This must be accompanied at the same time by a rationalization of public spending, insists the report which also calls on the Moroccan government to seek other sources of tax revenue through new forms of progressive tax. On the monetary level, the IMF recommends to Bank-Al-Maghrib to further support commercial banks by strengthening their liquidity and their reserves, with the possibility of reducing the key rate if necessary. The report also recommends further easing the flexibility of the exchange rate regime in order to cushion external shocks more.


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