Morocco's eco­nomic sig­nals im­prove dur­ing 2015: IMF

The Pak Banker - - COMPANIES/BOSS -

The Ex­ec­u­tive Board of the In­ter­na­tional Mon­e­tary Fund (IMF) com­pleted the third and last re­view of Morocco's eco­nomic per­for­mance un­der a pro­gram sup­ported by a two-year Pre­cau­tion­ary and Liq­uid­ity Line (PLL) ar­range­ment, and reaf­firmed Morocco's con­tin­ued qual­i­fi­ca­tion to ac­cess PLL re­sources.

The cur­rent two-year PLL ar­range­ment in an amount equiv­a­lent to SDR 3.2351 bil­lion (about US$5 bil­lion at the time of ap­proval or 550 per­cent of Morocco's quota at the IMF) was ap­proved by the IMF's Ex­ec­u­tive Board in July 2014. (See Press Re­lease No. 14/368). The ar­range­ment sup­ports the au­thor­i­ties' pro­gram to re­build fis­cal and ex­ter­nal buf­fers and pro­mote higher and more in­clu­sive growth.

It will ex­pire in July 2016. Morocco's first 24-month PLL ar­range­ment was ap­proved on Au­gust 3, 2012, with an ac­cess equiv­a­lent to 700 per­cent of the quota, and ex­pired in July 2014.

The PLL ar­range­ment has pro­vided in­sur­ance against ex­ter­nal risks. The Moroc­can au­thor­i­ties are treat­ing the ar­range­ment as pre­cau­tion­ary, as they did with the 2012-14 PLL ar­range­ment, and do not in­tend to draw un­der the ar­range­ment un­less Morocco ex­pe­ri­ences ac­tual bal­ance of pay­ments needs from a sig­nifi- cant de­te­ri­o­ra­tion of ex­ter­nal con­di­tions.

The PLL, which was in­tro­duced in 2011, pro­vides fi­nanc­ing to meet ac­tual or po­ten­tial bal­ance of pay­ments needs of coun­tries with sound poli­cies, and is in­tended to serve as in­sur­ance or help re­solve crises un­der wide-rang­ing sit­u­a­tions.

Fol­low­ing the Ex­ec­u­tive Board dis­cus­sion on Morocco, Mr. Mit­suhiro Fu­ru­sawa, IMF Deputy Man­ag­ing Di­rec­tor and Act­ing Chair of the Board, said Morocco's over­all eco­nomic per­for­mance has con­tin­ued to im­prove in 2015. Strong pol­icy im­ple­men­ta­tion has helped re­duce fis­cal and ex­ter­nal vul­ner­a­bil­i­ties and sig­nif­i­cant progress has been achieved on re­forms. In an en­vi­ron­ment that re­mains vul­ner­a­ble to im­por­tant down­side risks, con­tin­ued ef­forts to move ahead with dif­fi­cult but nec­es­sary re­forms will be key for re­duc­ing the re­main­ing vul­ner­a­bil­i­ties while pro­mot­ing higher and more in­clu­sive growth.

Fis­cal de­vel­op­ments have been pos­i­tive and con­sis­tent with the au­thor­i­ties' ob­jec­tive to re­duce the deficit to 4.3 per­cent of GDP in 2015. Sub­stan­tial progress has been achieved on the sub­sidy re­form, while sup­port to the most vul­ner­a­ble has ex­panded. Now that the draft leg­is­la­tion on the pub­lic sec­tor pen­sion re­form has been ap­proved by the govern­ment, its timely adop­tion by par­lia­ment and im­ple­men­ta­tion will be key.

Progress has also been made in up­grad­ing the fi­nan­cial pol­icy frame­work, in­clud­ing im­ple­ment­ing re­cent Fi­nan­cial Sec­tor As­sess­ment Pro­gram rec­om­men­da­tions, in ad­di­tion to im­ple­ment­ing Basel III norms and the new bank­ing law. An im­por­tant fur­ther step should be to fi­nal­ize the new cen­tral bank law in or­der to en­hance its in­de­pen­dence and ex­tend its su­per­vi­sory and res­o­lu­tion pow­ers. Prepa­ra­tions for a more flex­i­ble ex­change rate regime, which will help pre­serve com­pet­i­tive­ness and the econ­omy's abil­ity to ab­sorb eco­nomic shocks, are pro­gress­ing well.

Morocco's ex­ter­nal po­si­tion has im­proved con­sid­er­ably, ow­ing mainly to strong poli­cies, ris­ing ex­ports in newly de­vel­oped sec­tors, lower oil prices, and ro­bust FDI, with re­serves reach­ing a com­fort­able level. Struc­tural re­forms to im­prove the busi­ness cli­mate and en­hance com­pet­i­tive­ness con­tinue to be a pri­or­ity in or­der to build on those gains. The im­ple­men­ta­tion of the Na­tional Strat­egy for Em­ploy­ment will help ad­dress con­straints in the la­bor mar­ket and re­duce un­em­ploy­ment, es­pe­cially among the youth.

The ar­range­ment un­der the Fund's Pre­cau­tion­ary and Liq­uid­ity Line (PLL) re­mains on track. The PLL, which the au­thor­i­ties con­tinue to treat as pre­cau­tion­ary, has pro­vided Morocco with in­sur­ance against ex­ter­nal risks while sup­port­ing the au­thor­i­ties' eco­nomic strat­egy.

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