International Monetary Fund

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Program note


Last Updated: April 8, 2014

Current Program Status:

A 24-month Precautionary and Liquidity Line (PLL) in the amount of SDR 4.117 billion (about $6.2 billion, 700 percent of quota) was approved by the Executive Board of the IMF on August 3, 2012. The third and last review was completed on January 31, 2014.


Morocco’s economic performance over the past decade has been sound overall. After significantly decelerating in 2012 due largely to regional uncertainties, the crisis in Europe, high world commodity prices, and a poor harvest, overall growth accelerated to about 4.5 percent in 2013, driven by a strong rebound in agricultural production, and despite a slowdown in non-primary activity. Inflation has remained low. averaging about 2 percent despite the increase in the prices of some subsidized energy products. The fiscal deficit declined from 7.3 percent of GDP in 2012 to 5.4 percent of GDP in 2013, mostly reflecting a reduction in the subsidy bill resulting from policy actions and lower international oil prices. The current account improved on account of lower energy and food imports, which more than offset the decline in exports (notably phosphate exports).

In 2014, growth could reach close to 4 percent, as the nonagricultural sectors are expected to accelerate, and assuming an average agricultural harvest.. Inflation is expected to remain comfortably below 2½ percent. The authorities remain committed to fiscal consolidation and aim at a fiscal deficit below 5 percent. The current account deficit should continue to decline in 2014 to under 7 percent of GDP. International reserves have stabilized at about four months of imports since late 2012, despite continued external pressures.

Role of the IMF

To guard against potential exogenous shocks, Morocco asked in 2012 for a credit line from the IMF under a 24-month PLL. This arrangement supports the authorities’ policy agenda to rebuild fiscal and external buffers and to address medium-term challenges by providing insurance against external risks. The authorities have treated the arrangement, which will expire in August 2014, as precautionary and will continue to do so unless a severe deterioration of the external environment leads to actual balance of payment need. The IMF has also been supporting Morocco through technical assistance in several areas including public financial management and macroeconomic modeling in support of monetary policy.

The Challenges Ahead

Morocco continues to face external risks, notably those linked to a possible re-emergence of financial stress in Europe and global financial market volatility as advanced economies exit from unconventional monetary policy. Sustained implementation of the authorities’ economic agenda, including the subsidies and pension reform and structural reforms to increase competitiveness, is crucial to preserving Morocco’s solid performance and to making progress toward higher and more inclusive growth. The main challenges facing the authorities are to:

  • Continue to rebuild fiscal buffers and ensure medium-term fiscal sustainability. The authorities are committed to a consolidation path consistent with achieving a deficit of 3 percent of GDP by 2017. To this end, costly universal subsidies need to be replaced by well-targeted social programs. Early and gradual implementation and clear communication are important for the success of the reform. The recent partial indexation of the domestic prices of some subsidized petroleum products to international prices and the removal of subsidies to some fuel products are important steps toward shielding the budget from international fuel price increases.
  • Reduce external vulnerabilities and strengthen competitiveness. Structural reforms to increase export diversification and competitiveness, and continued fiscal consolidation, are needed to support external sustainability. Greater flexibility in the exchange rate regime, in coordination with other macroeconomic and structural policies, would also help enhance external competitiveness and the economy’s ability to absorb shocks.
  • Foster higher and more inclusive growth. This objective is to be supported by reforms aimed at enhancing potential growth and job creation; these include: strengthening economic governance by increasing transparency and accountability, improving the business climate, enhancing access to credit, and improving the functioning of the labor market. Further improving educational outcomes and reducing youth unemployment would also help boost potential growth.
  • Maintain adequate monetary and financial conditions, and preserve the stability of the financial sector. This is instrumental to ensuring that appropriate credit is provided to the economy, and to providing a sound basis for higher growth.
  • Sustain the delivery of difficult reforms in a context of high expectations and a volatile regional environment. Good communication and high-quality social dialogue will be essential to success.