Morocco’s economic growth is expected to accelerate gradually over the medium term, despite downside risks, the International Monetary Fund said following its second review of the country’s $3 billion Precautionary and Liquidity Line (PLL).
The Washington-based multilateral lender approved the funding package last year to help the North African country reduce its fiscal deficit and mitigate the risk of external shocks to its economy.
“Morocco has made significant strides in strengthening the resilience of its economy in recent years. In 2019, economic activity has weakened due to a contraction in agricultural output, while inflation remains low,” IMF deputy managing director and acting chair Mitsuhiro Furusawa, said in a statement.
Morocco secured three credit lines from the IMF worth $6.2bn in 2012, about $5bn in 2014 and $3.5bn in 2016. The PLL is intended for countries with relatively good economic policies that face balance of payments needs because of external factors outside their control such as a rise in oil prices.
Over the medium-term, the country’s economic growth is expected to accelerate gradually, but progress on reform could be delayed due to slow implementation as well as the external environment, according to the IMF.
“In this context, the PLL arrangement continues to provide valuable insurance against external risks and support the authorities’ economic policies,” said Mr Furusawa.
Morocco has struggled to revive economic growth after a slowdown in key industries such as agriculture.
Stepped-up tax reforms and a contained wage bill are required to lower the public debt-to-gross domestic product ratio, while securing priority investment and social spending over the medium-term, the IMF said.
The institution also commended Morocco over its transition to greater exchange rate flexibility, citing the measure as a cushion against shocks. The North African state adopted a floating exchange rate in January 2018, increasing it to 2.5 per cent from 0.03 per cent. However, the country paused the measure earlier this year and is now reviving plans this year to float the Moroccan dirham. The IMF also encouraged Egypt to float the pound in 2016 as a key requirement for borrowing $12bn.