IMF Executive Board Completes the Second Review Under the Precautionary and Liquidity Line Arrangement for Morocco
IMF News, December 14, 2019
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- Published: December 14, 2019
Recent economic assessment and developments
- 2019: Economic activity weakened due to a contraction in agricultural output.
- Inflation: remains low (no numeric value provided).
- External position: expected to improve only modestly (no numeric value provided).
- Fiscal consolidation: has slowed down due in part to weaker-than-expected tax revenues and increased public wage spending.
Outlook and risks
- Growth: expected to accelerate gradually over the medium term (no numeric value provided).
- Downside risks highlighted: potential delays in reform implementation and risks from the external environment.
- Role of PLL: continues to provide valuable insurance against external risks and support the authorities’ economic policies.
Policy recommendations and priorities (quoted and summarized)
- Fiscal policy:
- "Stepped up tax reforms and contained wage bill are needed to lower the public debt-to-GDP ratio while securing priority investment and social spending in the medium term."
- "A decisive and comprehensive tax reform should aim to secure adequate revenues while bringing about greater equity and simplicity of the tax system."
- Improve efficiency and governance of the public sector.
- Careful implementation of fiscal decentralization.
- Strengthened state-owned enterprise oversight.
- Better targeting of social spending.
- Monetary and exchange rate policy:
- "The transition to greater exchange rate flexibility initiated last year would enhance the economy’s capacity to absorb shocks and preserve its external competitiveness."
- Implement this reform in a sequenced and well-communicated manner while the economic environment is favorable.
- Financial sector:
- Following the adoption of the central bank law, address weaknesses in the AML/CFT framework.
- Continue to make the supervisory framework more risk-based and forward-looking to further improve financial sector soundness.
- Structural reforms to raise potential growth and inclusion:
- "Building on recent progress in improving the business environment, sustained reforms are needed to raise potential growth and reduce high unemployment, especially among the youth, increase female labor participation, and reduce regional disparities."
- Reforms of education, governance, and the labor market to support more private sector-led growth and job creation.
Key statements
- From Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair:
- "Morocco has made significant strides in strengthening the resilience of its economy in recent years."
- Additional summary remarks emphasize the authorities’ commitment to sustaining sound policies and aligning the government’s economic program with key reforms agreed under the PLL arrangement.
International Monetary Fund — Press Release No. 19/459, December 13, 2019.