Morocco faces a difficult economic situation due to soaring food and fuel prices and slow growth
Morocco has officially asked the International Monetary Fund (IMF) for a Flexible Line of Credit (LCM) of 5 billion dollars, in a context of the kingdom ‘s high indebtedness , the institution said in a press release .
The LMC is a financing mechanism that helps countries to protect themselves against external shocks through immediate access to resources from the Fund, without conditionality a posteriori, recalls the IMF.
“Given the strength of Morocco’s economic policy frameworks and track record, IMF Managing Director Kristalina Georgieva intends to recommend approval of an MCL arrangement for Morocco,” explains the press release published on Monday evening.
The IMF’s board of directors examined the Moroccan authorities’ request on Monday and is due to meet again in the coming weeks to take a decision.
Good news from the Financial Action Task Force
Rabat’s long-awaited request comes as the Maghreb country has just left the gray list of countries subject to enhanced surveillance by the Financial Action Task Force (FATF), an anti-money laundering organization. An exit on which Morocco’s eligibility for the LCM depended.
This FATF decision comes following the positive conclusions contained in the report of the group’s experts, sanctioning the field visit to Morocco from January 16 to 18, 2023.
“This exit from the FATF’s gray list also coincides with the roadshow started internationally by the kingdom’s monetary authorities with a view to raising currencies on the financial markets, the first of its kind since December 2021”, notes the Moroccan economic weekly La Vie Éco. “Thus, the removal of Morocco from this gray list should have a positive impact on the rating of its sovereign debt and allow it to borrow currencies under optimal conditions.
“The Moroccan authorities intend to treat the flexible credit line as a precautionary device”, specifies the press release.
“The IMF is ready to continue to help Morocco deal with the risks resulting from a very uncertain world situation”, he concludes.
In recent years, Morocco has used another credit facility, the Precautionary and Liquidity Line (LPL).
The Cherifian kingdom is one of the most indebted countries in Africa.
“The state needs to run up debt not only on the domestic market to make up the budget deficit but also in foreign currency to deal with the abyssal deficit in the trade balance, at 312 billion dirhams [31 billion dollars] for 2022, almost 23%-24% of GDP,” remarks economist Najib Akesbi.
“Recourse to external borrowing is also a sign that there are difficulties in obtaining supplies on the internal market”, underlines the specialist, who is also concerned about the “opacity” of access conditions. , reimbursement and cost of the LCM.
Morocco faces a difficult economic situation due to soaring food and fuel prices and slow growth.
Inflation in Morocco is hovering around 8% on an annual basis, fueled by the repercussions of the war in Ukraine , particularly on the cost of fuel and the transport of goods, according to the latest World Bank report.
In January, consumer price inflation accelerated to 8.9% year on year, driven by soaring food prices (+16.8%).
In its latest report , the IMF, in early February, revised the country’s growth upwards to 3% in 2023 against 1.25% in 2022. An increase justified by the “improvement in agricultural production and its positive impacts on the rest of the economy.
The fund also expects “a gradual decline in inflation thanks to the support measures provided for in the 2023 finance law which will boost consumption”.
But the IMF also highlighted the “risks” that could impact the Moroccan economy: the fall in demand from the euro zone, the volatility of basic products and the tightening of financial conditions.
At the end of December, the Central Bank of Morocco (BAM) had to raise its key rate by 50 basis points, to 2.50%, in order to curb the strong inflationary surge (+ 6.6% in 2022).
