Press Release No. 17/272

IMF Staff Completes Second Review Mission of the Precautionary and Liquidity Line for Morocco

July 10, 2017

• Overall, Morocco’s economic policies and fundamentals are sound.
• The Moroccan authorities continue to pursue fiscal, financial, and structural reforms that support higher and inclusive growth.
• IMF team supports Morocco’s reform efforts to reduce unemployment and regional and social disparities.

An International Monetary Fund (IMF) staff team led by Nicolas Blancher visited Morocco from June 29 to July 10, 2017 to conduct discussions with the Moroccan authorities on the second review under the Precautionary and Liquidity Line (PLL) arrangement. The IMF Executive Board approved the PLL arrangement for Morocco in the amount of SDR 2.504 billion (about US$3.42 billion) in July 2016 (See Press Release No. 16/355). The authorities have not drawn on the PLL and intend to keep the arrangement as precautionary.

At the conclusion of the mission, Mr. Blancher made the following statement:

"Morocco’s macroeconomic policies and performance remained sound, despite volatility in agricultural output, weak growth in trading partners, and elevated external risks. The Moroccan authorities remain committed to important fiscal, financial and structural reforms, which should strengthen the economy’s resilience to external shocks and support higher, more inclusive growth.

“Overall, macroeconomic fundamentals and the prospects for 2017 are sound: following last year’s drought, growth is expected to rebound this year to 4.8 percent, driven by strong recovery in the agricultural sector, while non-agricultural growth, which has remained subdued, should pick up modestly by 0.2 percentage points. Inflation is expected to slow to 0.9 percent for the year. Unemployment remains high, especially among the youth and women.

"The current account deficit should reduce to 4.0 percent of GDP in 2017, due to continued export growth and despite an increase in energy imports. Gross international reserves are expected to reach about US$24 billion at the end of 2017, about 6 months of imports. The IMF team welcomes the authorities’ intention to gradually move to a more flexible exchange rate regime, which would allow the Moroccan economy to better absorb external shocks and preserve competitiveness in the future.

"The fiscal deficit is projected to narrow to 3.5 percent of GDP by 2017, due to stronger revenue performance and contained spending. The IMF team welcomed the authorities’ plans to continue fiscal reforms, especially towards a more equitable and fairer tax system, and to reduce public debt to 60 percent of GDP by 2021. These efforts are critical to increase the fiscal space needed to reduce poverty and to promote employment through public spending, in particular investment and social programs targeted towards the poorest segments of the population and that help to reduce inequalities.

"The IMF team welcomes the progress made in strengthening financial sector soundness, and encourages the authorities to accelerate structural reforms to improve the business climate and governance, combat corruption, reduce unemployment, particularly among the youth, lessen regional and social disparities, and reform the educational system to create more skilled workers.

"The IMF team would like to thank the Moroccan authorities, as well as private sector and civil society organizations, for the constructive discussions and for their hospitality.”