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