Press Release No. 13/38

Press Release: The IMF Executive Board Completes the First Review Under Precautionary and Liquidity Line Arrangement for Morocco

February 4, 2013

The Executive Board of the International Monetary Fund (IMF) on February 1, 2013 completed the first review of Morocco’s performance under an economic program supported by a two-year Precautionary Liquidity Line (PLL) arrangement and reaffirmed Morocco’s continued qualification to access PLL resources.

The PLL was approved on August 3, 2012 in an amount equivalent to SDR 4,117.4 million (about US$6.3 billion, 700 percent of quota, see Press Release No. 12/287). The access under the arrangement in the first year is equivalent to SDR 2.4 billion (about US$3.6 billion, or 400 percent of quota), rising in the second year to cumulatively SDR 4.1 billion (about US$6.3 billion).

The PLL arrangement will continue to support the authorities’ home-grown reform agenda aimed at achieving higher and more inclusive economic growth by providing a useful insurance against external shocks. The PLL was introduced to meet more flexibly the liquidity needs of member countries with sound economic fundamentals and strong record of policy implementation but with some remaining vulnerabilities.

The IMF’s Executive Board welcomed the authorities’ intention to continue treating the arrangement as precautionary.

Following the Board’s discussion, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, issued the following statement:

“Over the past decade, Morocco’s overall sound macroeconomic policies helped deliver solid growth, low inflation, and poverty reduction, despite continued high youth unemployment. This extended period of sound economic performance has been recently challenged by a worsening of the external environment and a below-average harvest, even though the nonagricultural GDP growth remained robust and inflation low. Against this backdrop, the authorities’ economic strategy is built appropriately on fiscal consolidation, structural reforms and prudent monetary and financial policies. Sustained implementation will be key to rebuilding buffers, preserving macroeconomic stability and achieving stronger and more inclusive growth.

“The arrangement under the Fund’s Precautionary and Liquidity Line (PLL), which the authorities intend to continue to treat as precautionary, has provided Morocco with an insurance against external risks and supported the authorities’ economic strategy.

“The authorities’ fiscal strategy, including the 2013 budget, is in line with their commitment to maintain fiscal sustainability and support external adjustment. As part of this strategy, it will be important to move ahead with the reforms of the general subsidy system and the pension system and to better target social protection. Fiscal space needs to be preserved to support higher and more inclusive growth.

“Efforts to strengthen competitiveness and better equip the economy to respond to external shocks are a priority. The planned fiscal consolidation and structural reforms, such as those to improve the business climate and professional training, will help underpin external sustainability. Morocco is encouraged to move toward greater exchange rate flexibility to enhance external competitiveness and the economy’s ability to absorb shocks, in coordination with other macroeconomic and structural policies.

“Over the past decade, substantial progress has been made in improving social indicators. However, sustained further efforts are still needed to increase growth and make it more inclusive, notably by boosting employment, in particular of the youth, reducing income inequalities, and increasing access to health care and education.”