On January 19, the Executive Board of the International Monetary Fund (IMF) completed the third and final review under the Precautionary and Liquidity Line (PLL) Arrangement for Morocco. The arrangement supports the authorities’ economic reform program to rebuild fiscal and external buffers and promote higher and inclusive growth.
- Raising potential growth and making it more inclusive and reducing regional disparities will require sustained reforms.
- Growth rebounded in 2017 and is expected to accelerate gradually over the medium term, subject to improved external conditions and steadfast reform implementation.
- Building on recent progress, continued fiscal consolidation will help lower the public-to-GDP debt ratio while securing priority investment and social spending in the medium term.
The two-year PLL arrangement for Morocco in the amount equivalent to SDR 2.504 billion (about US$3.61 billion) was approved by the IMF’s Executive Board in July 2016 (See Press Release No. 16/355). The Moroccan authorities have not drawn on the arrangement and continued to treat it as precautionary. The arrangement will expire on July 21, 2018.
Following the Executive Board’s discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said:
“Morocco’s sound macroeconomic policies and reform implementation have helped improve the resilience of the economy. External imbalances narrowed in 2017 and international reserves remain at a comfortable level. Fiscal developments were also positive, with the budget deficit declining due to strong revenue performance and contained spending. Growth rebounded in 2017 and is expected to accelerate gradually over the medium term, contingent on improved external conditions and steadfast reform implementation. However, the outlook remains subject to downside risks. In this context, Morocco’s Precautionary and Liquidity Line (PLL) arrangement with the Fund has been a useful insurance against external risks and has been supporting the authorities’ economic policies.
“The authorities are committed to sustaining sound policies. The new government’s economic program is in line with key reforms announced under the PLL-supported program, such as further reducing 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 the public debt-to-GDP ratio while securing priority investment and social spending in the medium term. Looking ahead, Morocco would benefit from a comprehensive approach to tax reforms, sound public financial management at the local level as part of fiscal decentralization, comprehensive civil service reform, strengthened state-owned enterprise (SOE) oversight, and better targeting of social spending.
“The recent introduction of greater exchange rate flexibility will help further improve Morocco’s external position, enhance the economy’s capacity to absorb shocks, and preserve its external competitiveness. Adopting the central bank law and continuing efforts to increase supervisory capacity in line with 2015 Financial Sector Assessment Program recommendations will help strengthen the financial sector policy framework.
“Finally, raising potential growth and making it more inclusive, by reducing persistently high unemployment levels, especially among the youth, increasing female labor participation, and reducing regional disparities will require further measures to advance education, governance, and labor market reforms, as well as to improve the business environment and support more private sector-led growth.”