The Executive Board of the International Monetary Fund (IMF) has approved a new two-year arrangement for Morocco under the Flexible Credit Line (FCL), valued at approximately US$ 4.5 billion. The amount is equivalent to Special Drawing Rights (SDR) 3.45 billion, which represents 386 percent of the country's IMF quota. This arrangement supersedes a previous FCL arrangement, which Morocco has canceled. Authorities in Morocco intend to treat this new arrangement as a precautionary measure.
This development marks Morocco’s second FCL agreement, with a reduction in access that aligns with the government's strategy to gradually decrease dependency on such financial support as risks allow. The initial FCL was sanctioned on April 3, 2023, amounting to SDR 3.7262 billion or 417 percent of the country's quota. Prior to this, Morocco benefited from four consecutive Precautionary and Liquidity Line (PLL) arrangements spanning from 2012 to 2020.
Following the discussions at the IMF Executive Board on Morocco, Deputy Managing Director, and Acting Chair, Kenji Okamura, commented, "The Moroccan economy has shown a sustained track record of implementing very strong policies and remarkable resilience to recent shocks, although a succession of droughts has severely curtailed agricultural production and pushed unemployment to historical highs."
Mr. Okamura further elaborated on Morocco's policy infrastructure, stating, "Morocco’s very strong institutional and policy frameworks have been effective in addressing these shocks, with well-calibrated fiscal, monetary, and financial policies. The recent bond issuance in the international capital markets at very favorable terms is a testament to the authorities’ very strong track record."
He also highlighted Morocco’s future commitments, citing, "Looking ahead, the authorities are committed to continuing to implement their ambitious structural reform agenda towards a more resilient, inclusive, greener, and private sector-led growth, and further strengthening their institutional policy frameworks. The new FCL arrangement will continue to be instrumental in supporting Morocco’s commitment to such strong policies and reforms."
The new arrangement will also act as a safeguard for Morocco against potential adverse scenarios. "The new FCL arrangement will also continue to provide Morocco insurance against downside risks. The Moroccan economy remains vulnerable to a worsening of global economic and financial conditions, higher commodity prices, and new occurrences of droughts," Mr. Okamura added.
As part of the arrangement, the authorities aim to gradually reduce access within the framework of an exit strategy, which is dependent on the evolution of risk factors. This intention of a cautious approach is reinforced by their statement, "The authorities are committed to treating the new FCL arrangement as precautionary and gradually reducing access, in the context of their exit strategy, contingent on the evolution of risks."
This decision comes amid Morocco's ongoing struggles, including a global pandemic, the economic repercussions from Russia's invasion of Ukraine, a significant earthquake in 2023, and recurring droughts. Despite these challenges, Morocco has managed to retain macroeconomic stability through targeted fiscal, monetary, and financial policy measures, aiming for more inclusive growth and addressing water scarcity issues. Medium-term growth for Morocco is expected to reach 3.6 percent, bolstered by infrastructure projects and the advancement of structural reforms.
The IMF's approval acknowledges Morocco's "very strong institutional policy frameworks and economic fundamentals" and recognizes the effectiveness of past policy implementations as a reason for extending the FCL. The arrangement is intended as a proactive measure to continue building financial buffers while advancing reform implementations within a complex and uncertain global landscape.