IMF Executive Board Approves US$6.2 Billion Arrangement for Morocco under the Precautionary Liquidity Line

Press Release No. 12/287
August 3, 2012

The Executive Board of the International Monetary Fund (IMF) today approved a 24-month arrangement for Morocco under the Precautionary Liquidity Line (PLL) in an amount equivalent to SDR 4,117.4 million (about US$6.21 billion, 700 percent of quota). The access under the arrangement in the first year will be equivalent to SDR 2,352.8 million (about US$ 3.55 billion, 400 percent of quota), rising in the second year to cumulatively US$ 6.21 billion.

The PLL will allow the authorities to continue with their home-grown reform agenda aimed at achieving rapid and inclusive economic growth, while providing them with a useful insurance against external shocks. The Moroccan authorities have stated that they intend to treat the arrangement as precautionary and do not intend to draw on the line, unless Morocco experiences actual balance of payments needs from a deterioration of external conditions.

The PLL was introduced in 2011 to meet more flexibly the liquidity needs of member countries with sound economic fundamentals and strong record of policy implementation but with some remaining vulnerabilities.

Following the Executive Board discussion on Morocco, Christine Lagarde, IMF Managing Director and Chair of the Board, made the following statement:

“Morocco’s track record of strong economic policies and wide-ranging structural reforms has contributed to solid macroeconomic performance, notably robust growth, low inflation, and a resilient banking system. These positive developments, together with strong economic fundamentals and institutional frameworks, have helped Morocco cushion the impact of the global crisis and respond to pressing social needs.

“High oil prices have contributed to a build-up of fiscal and external pressures. The authorities have already taken action to address these vulnerabilities, and are committed to maintaining sound policies. The recent increase in domestic administered oil prices is a tangible signal of the authorities’ resolve to reform the subsidy system and to ensure fiscal sustainability more broadly. The authorities’ economic program aims to improve social indicators, reduce unemployment, boost competitiveness, and increase the potential for higher and more inclusive growth. The authorities will continue to monitor the health of the financial system to preserve its soundness, and to maintain an adequate level of international reserves.

“Notwithstanding these comprehensive policy measures and favorable macroeconomic prospects, Morocco faces external risks linked to uncertainties in the euro zone and potential oil price increases. A two-year arrangement under the Precautionary and Liquidity Line will provide Morocco with a useful insurance policy for meeting immediate financing needs if these risks materialize, strengthening market confidence and facilitating better access to private capital markets. The authorities intend to treat the arrangement as precautionary.”



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