International Monetary Fund

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Program note


Last Updated: April 4, 2015

Current IMF-Supported Program:

A 24-month Precautionary and Liquidity Line (PLL) in the amount of SDR 3.2351 billion (about $5 billion, 550 percent of quota) was approved by the Executive Board of the IMF on July 28, 2014. The first review was completed on February 6, 2014.


Morocco’s economic performance over the past decade has been sound overall. After recent turbulences, the economy is now improving.

After a bumper crop in 2013, agriculture output has contracted and brought down GDP growth in 2014 to below 3 percent. The unemployment rate has increased to 9.9 percent in 2014, being particularly high among young people (at about 20 percent). Inflation remains low (0.4 percent on average in 2014). After reaching peaks in 2012, both the fiscal and current account deficits have decreased. The current account deficit narrowed to 5.8 percent of GDP at end-2014, mostly reflecting rising exports from newly developed industries and lower international oil prices. International reserves have also improved. The fiscal deficit was reduced to 4.9 percent of GDP in 2014, owing in particular to the ambitious subsidy reform. Public and external debts have increased but remain sustainable.

Growth is projected to rebound in 2015, as the nonagricultural sector recovers and agricultural production is expected to return to, or above, normal levels. The fiscal and external deficits should continue to narrow, while inflation is expected to remain low. Subject to the continued implementation of reforms, growth is expected to continue accelerated in the medium term. However, this outlook remains subject to important downside risks relating to the geopolitical risks in the Middle East and in Ukraine/Russia, a protracted period of slow in advanced economies.

Role of the IMF

To guard against potential exogenous shocks, Morocco asked in 2014 for a second credit line from the IMF under the 24-month PLL. This second arrangement continues to support the authorities’ policy agenda to further reduce external and fiscal vulnerabilities, while promoting higher and more inclusive growth. The authorities have treated the arrangement as precautionary and intend to continue to do so unless a severe deterioration of the external environment leads to actual balance of payment need. The IMF has also been supporting Morocco through technical assistance in several areas including macroeconomic modeling in support of monetary policy, exchange rate regime, macro prudential policies, tax administration and public finance management.

The Challenges Ahead

The authorities have implemented strong policy actions to reduce vulnerabilities. These include significant progress to eliminate the cost and fiscal risks associated with energy subsidies by removing all subsidies on liquid petroleum products while extending programs to support the most vulnerable populations, and a strengthening of their economic and financial policies framework (e.g.,  new banking law, new organic budget law).

In the context of significant external risks, sustained implementation of reforms will be essential to consolidate gains in macroeconomic stability. In addition, despite progress achieved over the last decade, more needs to be done to foster higher growth, lower unemployment and reduce inequalities. The main challenges facing the authorities are to continue to:

  • Rebuild fiscal buffers and to ensure medium-term fiscal sustainability. The authorities are committed to reducing the fiscal deficit to 3 percent of GDP by 2017. To this end, they have successfully embarked since 2013 on fiscal consolidation, while seeking not to compromise growth. Further reduction in subsidies and public wage moderation would help continue on that path while providing space to reorient spending toward investment, education and social programs. The pension system urgently needs reform to ensure its viability and broaden its coverage. Reforming the tax system is also important to bolster the contribution of the fiscal sector to growth.
  • Implement reforms to strengthen the competitiveness of the economy and boost growth and employment. This requires further improving the business climate by improving governance, competition and transparency and reducing red-tape. Giving more flexibility to the exchange rate regime would also help the economy better absorb shocks and support the diversification of economic and financial flows. In addition, there is a need to ensure that the functioning of the labor market is conducive to private sector job creation.
  • Maintain adequate monetary and financial conditions, and preserve the stability of the financial sector. This is instrumental to ensuring that appropriate credit is provided to the economy and to providing a sound basis for higher growth by fostering greater access to credit for households and small-and-medium-sized enterprises.