2023-06-16 20:35:21
Energy at first then food, inflation in Morocco could soon become purely monetary. And to understand this phenomenon, we have to go back to 2020 and the pandemic which has had several consequences on the consumption and savings habits of Moroccans. The explosion in remittances from Moroccans living abroad and the drop in interest rates on savings have also contributed to this phenomenon. “We have gone from monetary creation of 168 billion dirhams between 2017 and 2019 to 314 billion over the period 2020-2022. This increase is explained at 95% by the liquid part of the money supply”, points out Ahmed Zhani, chief economist of CDG Capital, during a meeting
consequences for the banking system
The “liquefaction” of the money supply makes banking resources more volatile. “This situation could generate a balance sheet risk for banks given the preponderance of medium and long-term commitments, particularly in mortgages,” explains Zhani, referring to the ALM (Asset and Liability Management) constraints of banks which require financing long-term loans with stable resources.
Bank Al-Maghrib is trying to act on this situation by raising the key rate, which in theory should have an impact on the remuneration of savings. But in reality, banks have only marginally increased their deposit rates since September 2022. Rates associated with 6-month term deposits have increased by only 32 bps and 12-month interest rates by 53 bps, while the key rate rose by 150 bps.
Feeding the informal sector
The efforts undertaken by the financial community over the past decade to make Morocco an economy that is moving towards zero cash have been shattered since Covid-19. Currency circulation has increased by a third since the pandemic and recorded record after record. “Fiduciary circulation increased by nearly 50 billion dirhams in 2020 and 33.6 billion in 2022 against an average of 17 billion recorded over the period 2015-2019. This represents a source of growth in the informal sector and the parallel exchange market,” warns Ahmed Zhani.
A new form of inflation in sight
The increase in the money supply in circulation at a rate well above real GDP growth could represent a source of inflation, of a monetary type, in the medium and long term. According to Ahmed Zhani, the first signals are already beginning to appear: “The balance sheet of companies shows a growth in their savings to the detriment of households. Eventually, this situation will lead to a transfer of this savings from companies to shareholders who, themselves, will fuel financial bubbles in real assets, real estate in particular, ”he analyzes. “It’s a risk to watch over the next few years,” warns the economist.
The tightening of monetary policy is in theory the main tool to combat this situation. But BAM’s approach, which consists of acting solely on the key rate, has not so far made it possible to reduce the rate of growth in loans, particularly among companies which, paradoxically, bear the brunt of the increase in deposit rates. Elsewhere in the world, central banks are adopting firmer policies by reducing their advances to the banking system while increasing the key rate.
But Bank Al-Maghrib has chosen to maintain its injections into the banking system, regularly preserving surpluses around 15 billion dirhams, identical to the Covid period when it had decided to open the floodgates completely.
We now find ourselves in a situation where the money supply represents more than 133% of GDP (136% in 2020). An untenable situation in the long term where the value of the goods will have to increase to absorb these liquidities. Historically, the money supply has remained below 120% of GDP.
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