Morocco is counting on the International Monetary Fund’s (IMF) Board of Directors to renew a $5 billion agreement in March next year. This might come as a surprise to many experts who view Morocco as an economically prosperous country that theoretically shouldn’t need support from the international financial institution.
Rabat first signed a Flexible Credit Line agreement with the IMF in 2023 for a two-year period, which is set to expire in April. This mechanism is designed for crisis prevention and to bolster the Kingdom’s foreign reserves. It has been used by Moroccan authorities as a precautionary measure without actually drawing on the funds.
A Cocktail of Performance and Relationships
Discussions between the two parties are ongoing. Given the reforms implemented in recent years and Morocco’s relations with the most influential countries on the international stage, it’s hard to see the request being denied.
Morocco closed its 2024 fiscal year with a deficit of 3.9% and aims for 3.5% this year. The government is seeking to increase tax revenues and rationalize spending, which aligns with the IMF’s preferred formula, while targeting an economic growth rate of 4.6%.
Financial Cushion
At the same time, Morocco needs financial buffers to cope with any new increases in commodity and food prices, which have been highly volatile in recent years due to global geopolitical tensions.
The Kingdom wants to stabilize its finances to invest in infrastructure and modernize the country ahead of the 2030 FIFA World Cup, which it will co-host with Portugal and Spain.
Net foreign investments saw a 55.4% increase in 2024, reaching $1.72 billion. Incoming flows were set at $4.31 billion, up 24.7% year-on-year.
Ultimate Goal
The ultimate aim of this agreement with the IMF is to maintain Morocco’s economic momentum and protect its currency from depreciation. The list of nations that have hosted major sporting events only to fall into severe crises afterwards is long, often starting with a devaluation of the local currency. Clearly, Moroccans have taken this lesson to heart.
