Press Release No. 19/220

IMF Executive Board Completes the First Review Under the Precautionary and Liquidity Line Arrangement for Morocco

June 14, 2019

• Growth is expected to accelerate gradually over the medium term, subject to improved external conditions and continued reform implementation.
• The PLL arrangement continues to provide valuable insurance against external risks and support the authorities’ economic policies.
• Building on progress made in recent years, continued fiscal consolidation will help lower the public-to-GDP debt ratio while securing priority investment and social spending in the medium term.

On June 12, the Executive Board of the International Monetary Fund (IMF) completed the first review under the Precautionary and Liquidity Line (PLL) Arrangement for Morocco. The arrangement supports the authorities’ policies to strengthen the economy’s resilience and promote higher and more inclusive growth.

The two-year PLL arrangement for Morocco in the amount equivalent to SDR 2.1508 billion (about US$3 billion) was approved by the IMF’s Executive Board in December 2018 (See Press Release No. 18/477). The Moroccan authorities have not drawn on the arrangement and continued to treat it as precautionary. The arrangement will expire on December 16, 2020.

Following the Executive Board’s discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said:

“Morocco has made significant strides in strengthening the resilience of its economy in recent years. While economic activity has weakened since 2018 due to lower agricultural growth, growth is expected to accelerate gradually over the medium term, subject to improved external conditions and continued reform implementation.

“However, the outlook remains subject to significant downside risks, including weaker growth in Morocco’s main trading partners, geopolitical risks, and volatile global financial conditions. In this context, the PLL arrangement continues to provide valuable insurance against external risks and support the authorities’ economic policies.

“The authorities are committed to sustaining sound policies. The government’s economic program remains in line with key reforms agreed under the PLL arrangement, including to further reduce fiscal and external vulnerabilities, while strengthening the foundations for higher and more inclusive growth.

“Building on progress made in recent years, continued fiscal consolidation will help lower public debt, which remains sustainable with high probability and resilient to shocks, while securing higher priority investment and social spending in the medium term. Morocco will benefit from a comprehensive tax reform aimed at greater equity and simplicity of the tax system, improvements in the efficiency and governance of the public sector, sound public financial management at the local level as part of fiscal decentralization, strengthened state-owned enterprise oversight, and better targeting of social spending.

“The transition to greater exchange rate flexibility initiated last year will enhance the economy’s capacity to absorb shocks and preserve its external competitiveness. The current favorable economic environment remains supportive to continue this reform in a carefully sequenced and well-communicated manner. The recent adoption of the central bank law, addressing weaknesses in the AML/CFT framework, and continuing to make the supervisory framework more risk-based and forward-looking will help further improve financial sector soundness.

“Finally, continued reforms are needed to raise potential growth and reduce high unemployment levels, especially among the youth, increase female labor participation, and reduce regional disparities. In particular, reforms of education, governance, the labor market, and the business environment would help support more private sector-led growth and job creation.”