IMF Survey: Morocco Taps $6.2 Billion Precautionary Loan from IMF

IMF News, August 3, 2012

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The Executive Board of the International Monetary Fund has approved a $6.2 billion liquidity line for Morocco.
The 24-month loan is provided under the IMF’s new Precautionary and Liquidity Line (PLL).
The PLL was added to the IMF lending toolkit in 2011.
The loan is precautionary; Morocco has said that it does not intend to draw on it in the absence of exogenous shocks.

Designed to flexibly meet the liquidity needs of member countries with sound economic fundamentals but with some remaining vulnerabilities.
Intended to provide rapid access to resources—similar to an insurance policy—in the event of external shocks or a worsening international situation.
Aims to strengthen investors’ confidence and facilitate international market access by signaling that Morocco’s current policies are sound and that the authorities have adequate resources to draw upon if needed.
Specifically cited risks: swings in oil prices and potential fallout from the downturn in Europe; heightened uncertainty worldwide.

Overall real GDP growth:
- Projected to slow from about 5 percent in 2011 to about 3 percent in 2012, largely as a result of lower agricultural growth following poor rainfall.
Nonagricultural GDP growth:
- Projected to remain robust, reaching about 4.7 percent in 2012, supported by strong domestic demand and an increase in government spending.
Current account deficit:
- Expected to decline from 8 percent of GDP in 2011 to 7.4 percent in 2012, and to improve further over the medium term.
Foreign exchange reserves:
- Expected to stabilize in the second half of 2012 due to recent measures to tighten fiscal policy, a decline in international oil prices compared to early in the year, an increase in export volumes of phosphates and derivative products, production for exports from new industrial plants (Renault just started exporting from Morocco to Europe), and a seasonal pickup in tourism receipts.

Morocco initiated a political reform process:
- A new constitution was adopted by referendum in July 2011.
- Elections were held in November 2011.
- The head of the Justice and Development Party, which received the highest number of votes during the elections, formed a new coalition government in January 2012.
- Local elections will follow the adoption of the planned new regionalization and budget organic laws.
New constitution features:
- Rebalancing of powers through greater oversight of parliament over the executive.
- Greater responsibility of the government.
- Greater independence of the judiciary.
Ongoing pressures remain to address high youth unemployment, income inequalities, and governance.

Job creation declared a priority with specific target:
- Aim of reducing unemployment from 8.9 percent in 2011 to 8 percent by 2016.
Policy measures to support employment:
- Strengthen ongoing active labor market programs.
- Foster employment outside the main cities, with attention to underdeveloped areas.
Reforms to increase potential economic growth over the medium term to support exports, foreign investment inflows, and job opportunities.
Social protection reform:
- Reform the system of social protection for the most vulnerable segments of the population.
- Recommendation to better target costly universal subsidies to benefit those most in need, thereby preserving spending on public investment.
- Authorities plan broad consultation with civil society to determine the best strategy for reforming the subsidy system.

Source: IMF Survey, August 3, 2012.