Front Matter

Front Matter Page

IMF Country Report No. 16/265

MOROCCO

REQUEST FOR AN ARRANGEMENT UNDER THE PRECAUTIONARY AND LIQUIDITY LINE AND CANCELLATION OF THE CURRENT ARRANGEMENT—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR MOROCCO

August 2016

In the context of the Request for an Arrangement Under the Precautionary and Liquidity Line and Cancellation of the Current Arrangement, the following documents have been released and are included in this package:

  • A Press Release including a statement by the Chair of the Executive Board.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on July 22, 2016, following discussions that ended on June 8, 2016, with the officials of Morocco on economic developments and policies underpinning the IMF arrangement under the Precautionary and Liquidity Line. Based on information available at the time of these discussions, the staff report was completed on July 8, 2016.

  • A Statement by the Executive Director for Morocco.

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

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© 2016 International Monetary Fund

Front Matter Page

MOROCCO

REQUEST FOR AN ARRANGEMENT UNDER THE PRECAUTIONARY AND LIQUIDITY LINE AND CANCELLATION OF THE CURRENT ARRANGEMENT

July 8, 2016

Executive Summary

Context. As the current Precautionary and Liquidity Line (PLL) arrangement comes to an end in July 2016, the authorities have requested a successor arrangement. They have not drawn on the past two arrangements and have successfully reduced fiscal and external vulnerabilities in recent years. In an external environment that remains vulnerable to important downside risks, a successor arrangement would continue to insure against external risks and support the authorities’ policies to further strengthen the economy’s resilience and promote higher and more inclusive growth.

PLL arrangement. In line with the positive assessment of Morocco’s policies by the Executive Board in the context of the 2015 Article IV consultation and of the last PLL review, staff considers that Morocco continues to meet the PLL qualification criteria and recommends the approval of the authorities’ request:

  • Morocco’s economic fundamentals and policy frameworks are sound, the country is implementing (and has a track record of implementing) sound policies, and remains committed to maintaining such policies in the future. During the last PLL review, in January 2016, the Executive Board welcomed Morocco’s strong policy implementation, which helped reduce fiscal and external vulnerabilities, and the progress achieved on reforms despite external headwinds.

  • Staff assesses that Morocco performs strongly in four out of the five areas of PLL qualification (external, monetary, financial, and data), does not substantially underperform in the fiscal area, and does not face any of the circumstances under which the Fund might no longer approve a PLL arrangement.

Fund liquidity: The authorities intend to treat the new arrangement, of a proposed duration of two years, as precautionary. Staff estimates that under a stress scenario, potential financing needs by 2018 could lead to a total access level of 280 percent of quota, amounting to SDR 2.504 billion or $3.556 billion.

Approved By

Adnan Mazarei and Vitaliy Kramarenko

The staff team consisted of Mr. Nicolas Blancher (head), Ms. Lorraine Ocampos, Mr. Jean Frederic Noah Ndela, Ms. Anta Ndoye (all MCD), and Ms. Sanaa Nadeem (SPR). The discussions took place in Rabat between May 31 and June 8, 2016. Mr. Auclair, Ms. Cruz, and Ms. Kebet (all MCD) assisted in the preparation of the report.

The mission met with the Head of Government Mr. Benkirane, the Minister of Economy and Finance Mr. Boussaïd, Minister Delegate in Charge of the Budget Mr. El Azami El Idrissi, Governor of the Central Bank Mr. Jouahri, and other senior officials and representatives of the private sector and civil society. Mr. Daïri (OED) participated in most meetings.

Contents

  • Acronyms

  • CONTEXT

  • RECENT DEVELOPMENTS AND OUTLOOK

  • ECONOMIC POLICIES

  • A. Securing Fiscal Sustainability

  • B. Transitioning to New Exchange Rate and Monetary Regimes

  • C. Enhancing Financial Sector Stability

  • D. Growth-Friendly and Inclusive Environment

  • ASSESSMENT OF QUALIFICATION

  • A. General Assessment

  • B. Assessment of Specific Criteria

  • C. PLL Approval Criteria

  • PLL ARRANGEMENT DESIGN

  • A. External Risks

  • B. Scenario Calibration and PLL Access

  • C. Conditionality

  • D. Duration and Exit

  • CAPACITY TO REPAY THE FUND

  • STAFF APPRAISAL

  • BOXES

  • 1. Achievements under the Second PLL Arrangement

  • 2. External Stress Index

  • 3. Adverse Scenario Calibration

  • FIGURES

  • 1. Real and External Developments

  • 2. Fiscal and Financial Market Developments

  • 3. Structural Reforms

  • 4. Morocco and Selected Countries: Comparing Adverse Scenarios

  • 5. Reserve Coverage in an International Perspective, 2015

  • TABLES

  • 1. Selected Economic Indicators, 2012–21

  • 2. Budgetary Central Government Finance, 2012–21 (Billions of dirhams)

  • 3. Budgetary Central Government Finance, 2012–21 (Percent of GDP)

  • 4. Balance of Payments, 2012–21

  • 5. Monetary Survey, 2011–16

  • 6. Financial Soundness Indicators, 2008–15

  • 7. Capacity to Repay Indicators, 2016–21

  • 8. External Financing Requirements

  • 9. Proposed Access

  • 10. Impact on GRA Finances

  • ANNEXES

  • I. Public Debt Sustainability Analysis

  • II. External DSA

  • APPENDIX

  • Written Communication

  • Attachment. Technical Appendix

Acronyms

ARA

Assessing Reserve Adequacy

BAM

Bank al-Maghrib

EA

Euro Area

ESI

External Stress Index

FDI

Foreign Direct Investment

FCL

Flexible Credit Line

FSAP

Financial Sector Assessment Program

GDP

Gross Domestic Product

GRA

General Resources Account

G-RAM

Global Risk Assessment Matrix

IIP

International Investment Position

NIIP

Net International Investment Position

NPL

Nonperforming Loan

OBL

Organic Budget Law

PLL

Precautionary Liquidity Line

SDR

Special Drawing Rights

SME

Small and Medium Enterprises

TA

Technical Assistance

VAT

Value-Added Tax

VIX

Volatility Index S&P 500

W-COM

Written Communication

WEO

World Economic Outlook

Front Matter Page

Press Release No. 16/355

FOR IMMEDIATE RELEASE

July 22, 2016

International Monetary Fund

Washington, D.C. 20431 USA

Telephone 202-623-7100

Fax 202-623-6772

www.imf.org

Morocco: Request for an Arrangement Under the Precautionary and Liquidity Line and Cancellation of the Current Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Morocco
Author: International Monetary Fund. Middle East and Central Asia Dept.