## IMF Staff Completes 2020 Article IV Mission with Morocco

_IMF News, November 2, 2020_

## Source details

**Canonical URL:** [IMF Staff Completes 2020 Article IV Mission with Morocco](https://www.imf.org/en/news/articles/2020/11/02/pr20329-morocco-imf-staff-completes-2020-article-iv-mission)

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## Bibliographic details
- Published: November 2, 2020

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### Mission summary
- IMF staff team led by Roberto Cardarelli conducted a remote mission from October 19 to November 2, 2020 in the context of the 2020 Article IV consultation with Morocco.
- Press release notes that staff views are preliminary and do not necessarily represent the views of the IMF’s Executive Board; staff will prepare a report for the IMF's Executive Board subject to management approval.
- Mission expresses solidarity with Moroccans affected by the health crisis and thanks Moroccan authorities and representatives of the public and private sectors and civil society for cooperation.

### Macroeconomic outlook and scenarios
- Combined effect of the drought and the pandemic is expected to cause contraction of GDP in 2020 between 6 and 7 percent, depending on the evolution of the health crisis.
- IMF staff expects GDP growth to rebound next year to 4.5 percent as the effects of the drought and pandemic wane.
- Staff notes considerable downside risks around the 4.5 percent baseline projection.
- Unemployment rate expected to spike in 2020.
- Fiscal and external deficits are expected to widen in 2020, driven by lower tax revenues and tourism receipts.
- Resilience of remittances and lower imports have contained Morocco’s external financing needs.
- International reserves remain comfortably above last year’s levels, helped by the purchase of the IMF precautionary liquidity line in April and greater recourse to external financing.

### Fiscal policy assessment and recommendations
- Fiscal policy stance has been eased appropriately in 2020.
- Measures implemented in 2020 include wage subsidies, cash transfers to households in the informal sector, and extension of credit to firms; these measures sustained domestic demand, protected the most vulnerable, and supported the productive system.
- The 2021 Budget continues to support the recovery through investment impulses and announced reforms of the social protection system.
- Staff agrees the process of fiscal consolidation should be gradual and begin only once the economic recovery becomes well anchored.
- Staff recommends starting to reduce the public-debt-to GDP ratio from 2022 under its baseline projections; a slower-than-expected recovery would call for a delayed fiscal adjustment.
- Policy measures to rebuild fiscal buffers and finance expanded social protection:
  - Extend the tax base and increase the progressivity of the tax system.
  - Further public administration reforms to rationalize spending.
  - Proceed with the authorities’ privatization program.

### Monetary policy and financial sector
- Bank al-Maghrib (BAM) has taken decisive actions to mitigate the pandemic’s impact on the real economy and the financial sector.
- Staff supports the accommodative monetary stance, which should be maintained until there are signs that inflation has begun to increase.
- BAM envisages using all policy tools available to avoid further economic damage if downside risks materialize.
- Greater exchange rate flexibility would benefit the Moroccan economy by helping preserve international reserves and international competitiveness through better absorption of external shocks.
- Banks have been relatively resilient amid the pandemic due to relatively sound initial capital and liquidity positions and BAM’s strong response.
- Staff welcomes BAM’s decision to ask banks for increased provisioning and to suspend the distribution of dividends in 2020 to build buffers against potential deterioration in banks’ credit portfolios.
- BAM is actively monitoring asset quality and coordinating with the Ministry of Finance to finalize a resolution framework to reinforce the authorities’ toolkit.

### Structural reforms and social protection
- Advancing the structural reform agenda is essential to solidify the recovery and achieve stronger, resilient, and more inclusive growth.
- Staff congratulates authorities’ decisive efforts to expand social assistance in 2020 and stresses that a comprehensive reform of the social protection system is more urgent after the pandemic.
- Specific structural and social recommendations supported by staff:
  - Extend health care insurance to all Moroccans to increase access to higher quality services.
  - Harmonize current social assistance programs under a unified social registry to improve efficiency and targeting.
  - Reform state-owned enterprises to create conditions for a more efficient public sector and boost private sector development.
  - Continue preparing the legal framework for digitalization of the public administration and simplification of procedures.
  - Implement education reform, including overhaul of the vocational and professional formation system.
  - Improve governance and fight corruption.

### Background information
- Since 2012, Morocco benefited from four successive PLL arrangements with the IMF.
- On April 7, 2020, the Moroccan authorities purchased all available resources (about US$ 3 billion) under the Precautionary and Liquidity Line (PLL) arrangement. 

*IMF Staff press release — November 2, 2020.*

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## References

- [IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19)
- [Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19)
- [Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)
- [Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19)
- [Morocco and the IMF](http://www.imf.org/external/country/MAR/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [see
Press Release No. 20/138](https://www.imf.org/en/News/Articles/2020/04/08/pr20138-morocco-draws-funds-available-under-precautionary-liquidity-line-covid19-pandemic)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2020/11/02/pr20329-morocco-imf-staff-completes-2020-article-iv-mission_