Press Release No. 16/355

IMF Executive Board Approves US$3.47 billion for Morocco Under the Precautionary and Liquidity Line

July 22, 2016

• Access under the PLL arrangement in the first year will be equivalent to US$1.73 billion, or 140 percent of quota.
• Moroccan authorities have stated that they intend to treat the arrangement as precautionary
• The new PLL provides Morocco with useful insurance against external shocks as authorities pursue reform agenda aimed at higher and more inclusive growth which are elevated.

The Executive Board of the International Monetary Fund (IMF) today approved a two-year arrangement for Morocco under the Precautionary and Liquidity Line (PLL) for SDR 2.504 billion (about US$3.47 billion, or 280 percent of Morocco’s quota). The access under the arrangement in the first year will be equivalent to SDR 1.252 billion (about US$1.73 billion, or 140 percent of quota).

In recent years, the authorities have successfully reduced fiscal and external vulnerabilities and implemented key reforms with the support of two successive 24-month PLL arrangements. The new PLL arrangement will provide Morocco with useful insurance against external shocks as the authorities pursue their reform agenda aimed at further strengthening the economy’s resilience and fostering higher and more inclusive economic growth.

The authorities have stated that they intend to treat the arrangement as precautionary, as they have done under the previous two arrangements, and they do not intend to draw under the PLL unless Morocco experiences actual balance of payments needs from a significant deterioration of external conditions.

Morocco’s first PLL arrangement for SDR 4,117.4 million (about US$6.21 billion at the time of approval) was approved on August 3, 2012 (see Press Release No. 12/287). Morocco’s second 24-month PLL arrangement for SDR 3.2351 billion (about US$5 billion at the time of approval) was approved on July 28, 2014 (see Press Release No. 14/368).

The PLL was introduced in 2011 to meet more flexibly the liquidity needs of member countries with sound economic fundamentals and strong records of policy implementation but with some remaining vulnerabilities.

Following the Executive Board on Morocco, Mr. Mitsuhiro Furusawa, IMF Deputy Managing Director and Acting Chair of the Board, made the following statement:

“Despite the difficult global and regional environments, Morocco has made significant strides in reducing fiscal and external vulnerabilities and addressing medium-term challenges, supported by the two successive Precautionary and Liquidity Line (PLL) arrangements. External imbalances have declined substantially and fiscal consolidation has progressed, while policy and institutional frameworks have been strengthened, including through the implementation of the new Organic Budget Law, the adoption of the civil service pension reform, and ongoing improvements to financial sector oversight.

“Nevertheless, the economy faces significant downside risks. In particular, heightened geopolitical and security risks, a protracted period of slower growth in Morocco’s main trading partners, or more volatile global financial conditions could significantly affect the economy through higher oil prices, disruptions to export and tourism revenues and remittance and capital inflows, or higher borrowing costs. In this context, a successor PLL arrangement would serve as a valuable insurance against external risks and support the authorities’ economic policies.

“The authorities are committed to further reducing fiscal and external vulnerabilities while strengthening the foundations for higher and more inclusive growth. Building on the achievements made in recent years, further fiscal consolidation should be based on both continued expenditure control and further tax reforms. Timely implementation of the civil service pension reform and careful fiscal decentralization will help preserve fiscal sustainability. Adopting the revised central bank law and continuing to implement FSAP recommendations will further strengthen the financial sector policy framework. The authorities should push forward with their plan to transition to an inflation-targeting regime and greater exchange flexibility, which will help preserve competitiveness and enhance the economy’s capacity to absorb shocks.

“Continued reforms to improve the business climate, competitiveness, and labor market policies will be essential to increase potential growth, reduce persistently high unemployment levels, especially among the youth, and increase the participation of women in the labor force. “