Morocco & the IMF: Partnership for Progress
October 2020
Geography is destiny. Perhaps nowhere does this maxim play out more than in Morocco, which is uniquely positioned on the Mediterranean as a bridge between Africa, the Middle East, and Europe.
“Moroccan culture draws its foundation from Arab and Islamic civilizations, Amazigh, Saharawi, Judaic, African, and European,” said Dr. Bouchra Rahmouni, of the Policy Center, a think tank based in Casablanca. “The country has diversified its commercial and economic partners, and today is the gateway to a market of 1.5 billion consumers.”
However, the journey to a more robust, diversified economy has been a bumpy one. That’s because Morocco’s relatively small, oil- and rain-dependent economy has proved vulnerable to external shocks, including the global financial crisis of 2008 and, even more, the economic fallout from the COVID-19 pandemic. Moreover, economic growth has slowed over the last decade, and job creation hasn’t been able to catch up with an expanding working age population.
In response to these significant challenges, the Moroccan authorities have redoubled their efforts to reduce vulnerabilities and spur economic growth. How has the IMF—whose raison d’être is to support countries in situations such as these—helped?
Morocco’s relationship with the IMF dates back to 1958. In the aftermath of the 2008 crisis, Morocco worked closely with the IMF, with the goal of supporting the economy and preventing another crisis.
In 2012, the Government approached the IMF to access a Precautionary Liquidity Line (PLL) arrangement. This is a credit facility that is only available for countries that have good macroeconomic fundamentals and sound policies. The objective: to insure Morocco against economic shocks from abroad.
As for the PLL, Minister of Finance Mohamed Benchaaboun said in early 2020, “the purpose is obviously not for Morocco to draw on this line, but to be able to give more assurance to our partners and lenders--and also demonstrate, if necessary, all the trust the IMF is putting in our country.”
Since then, the PLL has proven useful as insurance against external risks, inspiring confidence among international investors and other market participants. And the arrangement was never more valuable than in April 2020 when Morocco drew on $3 billion from the PLL to help maintain adequate levels of reserves and tackle the sizable social and economic impacts of the crisis brought about by the pandemic.
One misperception about the IMF is that it compels countries to comply with certain external priorities dictated from abroad. Abdellatif Jouahri, Morocco’s Central Bank Governor, countered this view, explaining that his country’s work with the IMF is characterized by mutual respect. “The Fund is a permanent interlocutor,” said Jouahri. “We see each other every year. We evaluate the economic and financial situation.”
Teams from Morocco’s Finance Ministry and Central Bank meet with IMF staff every year as part of the IMF’s regular economic health checks (Article IV consultations). Since 2012, teams have met more often to monitor reforms as part of the PLL tracking discussions. That process received positive reviews from Jouahri, who emphasized the value of the Fund’s technical assistance: “We have worked a lot on monetary policy assessments. I must admit that the IMF teams were of a very high quality.”
Jouahri continued: “In many countries, it may be thought that the Fund imposes or dictates. I say no. We can attest that it is a partner because it took into consideration Morocco’s positions. In the framework of the missions that report to the Board of the International Monetary Fund, they explain quite honestly the position of Morocco, saying they trust Morocco to make the decisions at the most opportune moment.”
With the benefit of real-time tailored advice, Morocco has weathered external shocks and continued to diversify. Traditional sectors such as agriculture, fishing, and tourism have been buoyed by the impressive growth of phosphates, chemicals, and the auto sector.
“[The auto sector] is the leading export sector in the country in recent years,” said Abdelaziz Meftah, CEO of AMICA, an industry association. “We closed 2018 with 72 billion dirhams or 7.2 billion euros for export.”
Morocco’s automotive sector has indeed mushroomed to more than 200 actors, with three OEMs with an installed capacity of 700,000 vehicles—making it the leading automaker in the Middle East and North Africa.
The Renault Group is a major player, with 12,000 employees and 400,000 vehicles produced last year—90 percent of which were exported to more than 70 countries. “Our Tangier factory is an iconic factory. It is the largest automobile factory in Africa, and one of the driving forces behind Morocco’s exports,” said Marc Nassif, Managing Director of Renault Group, Morocco.
Morocco has been relying on positive feedback loops between reforms, a propitious business environment, and economic growth: “Stability is a major factor,” said Meftah. “It gives a positive signal to investors who are interested in the Moroccan auto platform. Once they’re invested on the platform, they can grow their exports across the Kingdom.”
These days, economic opportunity increasingly manifests from the South. “The acceleration observed in recent years is at the level of the African continent,” said Minister of Finance Mohamed Benchaaboun, “where under the leadership of His Majesty, there is a desire to strengthen South-South cooperation.”
Morocco has steadily grown as an international hub for African agricultural services. This is thanks to the OCP Group, a home-grown multinational corporation that is one of the leading exporters of phosphate rock and fertilizers in the world. OCP, which was founded in 1920, has recently turned a strategic gaze southward.
“The next agricultural green revolution in the years to come will take place on this continent, which has a very important potential,” emphasized Ghislane Guedira, OCP’s Chief Financial Officer. “First of all, because of the area and the arable lands that are going to be cultivated and also the potential for farmers to increase their productivity. We have every reason to be optimistic since we are operating in a sector whose role is to contribute to the food security of a growing population.”
There is a lot to be said about Morocco’s world-class logistics platform, advanced infrastructure, and sizable young labor pool (about two-thirds of the population is under age 35). But the country is not leaving anything to chance: in the past decade, it has signed more than 50 new free-trade agreements with countries across the globe.
With the collaboration of the IMF, Morocco has weathered past external challenges, strengthened macroeconomic resilience, and spurred economic growth. Now, policymakers face perhaps their greatest economic test yet while they continue to tackle long-term challenges such as income inequality and unemployment, which remains high, particularly among women and young people.
“The International Monetary Fund and international organizations have evolved greatly,” said Central Bank Governor Jouahri. “Now, we are not only talking about growth, we are talking about inclusive growth. So, a better distribution of the fruits of growth.”
As Morocco continues its reforms, its partnership with the IMF remains important. “His Majesty has embarked on a major reflection on a new development model and calls for a new generation of sectoral programs,” said Minister Benchaaboun. “For all these reforms, the Fund’s support is always desired.”
