Press Release: IMF Executive Board Approves US$5-Billion Arrangement for Morocco Under the Precautionary and Liquidity Line
IMF News, July 28, 2014
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- Published: July 28, 2014
Arrangement terms and access
- Approved: 24-month arrangement under the Precautionary and Liquidity Line (PLL).
- Amount: SDR 3.2351 billion (about US$5 billion, or 550 percent of Morocco’s quota at the IMF).
- First-year access: equivalent to SDR 2.941 billion (about US$4.5 billion, 500 percent of quota).
- Cumulative access in second year: US$5.0 billion.
- Prior arrangement: Morocco’s first 2-year PLL arrangement was approved on August 2, 2012 (Press Release No 12/287).
Treatment and intended use
- The Moroccan authorities have stated they intend to treat the arrangement as precautionary, as with the 2012 PLL.
- Authorities do not intend to draw under the arrangement unless Morocco experiences actual balance of payments needs from a significant deterioration of external conditions.
Purpose and rationale for the PLL
- The PLL arrangement will allow the authorities to pursue their homegrown reform agenda aimed at achieving rapid and more inclusive economic growth while providing insurance against external shocks.
- The PLL was introduced in 2011 to meet more flexibly the liquidity needs of member countries with sound economic fundamentals and strong records of policy implementation but with some remaining vulnerabilities.
IMF Executive Board statement — key findings and risks (Mr. Noayuki Shinohara)
- Findings on recent performance:
- Morocco has sound economic fundamentals and an overall strong record of policy implementation, contributing to solid macroeconomic performance in recent years.
- During the first PLL arrangement, the authorities made important strides in reducing vulnerabilities, rebuilding policy space, and addressing medium-term challenges.
- The authorities have been consolidating Morocco’s fiscal position while pursuing structural reforms to address vulnerabilities, strengthen competitiveness, and promote higher and more inclusive growth.
- The significant progress made in reforming the subsidy system is particularly commendable.
- External risks highlighted:
- The external environment remains subject to significant downside risks.
- Specific risks include protracted and slower–than-expected growth in Europe than currently projected, heightened financial market volatility, or a surge in oil prices resulting from geopolitical tensions.
- Such shocks could significantly affect the Moroccan economy.
- Role of the successor PLL:
- The successor PLL arrangement will continue to provide insurance to support the authorities’ economic policies.
Policy recommendations and reform priorities
- Fiscal and external vulnerability reduction:
- Control expenditure.
- Advance major reforms, including those of subsidies, pension and the tax system.
- Budget framework:
- Timely adoption of a new organic budget law will be essential to strengthen and modernize the budget framework.
- Exchange rate policy:
- Moving toward a more flexible exchange rate regime, in coordination with other macroeconomic policies, would help support competitiveness and enhance the economy’s capacity to absorb shocks.
- Structural reforms to boost growth and employment:
- Improve the business climate.
- Strengthen the judicial system.
- Improve access to finance.
- Reform the labor market.
Morocco’s IMF membership and quota
- Member since 1958.
- Quota: SDR588.2 million (about US$903.4 million).
Source: Press Release No. 14/368 — IMF, July 28, 2014.