Journal Issue

Rebounding Morocco should now Make Fiscal Consolidation a Top Priority

International Monetary Fund. External Relations Dept.
Published Date:
November 2006
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Morocco has started to reap the benefits of its reform efforts, but raising living standards to the level observed in other emerging economies still constitutes a challenge. Macroeconomic conditions continue to strengthen and the 2006 outlook is favorable. A bumper wheat crop and strong activity in services and construction are ushering in a recovery, following a slowdown in growth caused by bad weather in 2005. Inflation remains low.

In its annual review of the economy, the IMF said the external current account is expected to record its sixth consecutive surplus, thanks to strong tourism and workers’ remittances. At more than $18 billion, external reserves exceed the total stock of public external debt. Morocco’s fiscal position is improving, but the ratio of public debt to GDP, though declining, remains high.

Despite a buoyant revenue performance, the fiscal deficit is likely to be close to the 2006 budget target of 4.1 percent of GDP (down from 5.9 percent in 2005) because of expenditure pressures related to oil and food subsidies. With the objective to reduce the fiscal deficit to 3 percent of GDP and the public-debt-to-GDP ratio below 60 percent by 2009, the Moroccan authorities have started to curb wage bill growth through an early retirement scheme. They also plan to continue to gradu-ally align domestic petroleum prices with international prices and to reduce the fiscal cost of food subsidies by better targeting them to the most vulnerable groups. Banking sector conditions have improved following significant write-offs of nonperforming loans and the nearcompletion of the restructuring of two state-owned banks.



(percent change)
Real GDP5.
Consumer prices1.
(percent of GDP)
Current account balance2/
Total external debt35.130.829.026.124.6
(million dollars)
Gross reserves13,71616,29816,08018,76820,044

Excluding official transfers.

Data: Moroccan authorities and IMF staff estimates and projections.

Excluding official transfers.

Data: Moroccan authorities and IMF staff estimates and projections.

IMF Executive Directors commended the authorities on implementing sound macroeconomic policies and structural reforms. They also agreed with the authorities that recent achievements provide an opportunity to advance the reform process and accelerate growth to support increased employment and reduce poverty.

Fiscal consolidation should be the top policy priority, Directors said, and they welcomed ongoing efforts to broaden the tax base and increase revenue, and supported the possible transition to a flexible exchange rate regime.

For more information, please refer to IMF Public Information Notices Nos. 06/101 (Belarus) and 06/115 (Morocco) on the IMF’s website (

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