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IMF Country Report No. 18/58

MOROCCO

THIRD REVIEW UNDER THE ARRANGEMENT UNDER THE PRECAUTIONARY AND LIQUIDITY LINE (PLL)—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR MOROCCO

February 2018

In the context of the Third Review Under the Arrangement Under the Precautionary and Liquidity Line (PLL), 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 January 19, 2018, following discussions that ended on November 7, 2017, 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 January 8, 2018.

  • A Staff Statement updating information on recent developments.

  • 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

International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090

Telephone: (202) 623–7430 • Fax: (202) 623–7201

E-mail: publications@imf.org Web: http://www.imf.org

Price: $18.00 per printed copy

International Monetary Fund

Washington, D.C.

© 2018 International Monetary Fund

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MOROCCO

THIRD REVIEW UNDER THE ARRANGEMENT UNDER THE PRECAUTIONARY AND LIQUIDITY LINE (PLL)

January 8, 2018

Executive Summary

Context. Macroeconomic vulnerabilities have declined since 2012, but growth remains subdued and sensitive to volatile agricultural output. External imbalances are contained and fiscal consolidation resumed in 2017 after a pause in 2016. Job creation has improved but unemployment remains high, particularly among the youth. Social tensions increased in 2017, and in response, the authorities took steps to accelerate local social programs and investment projects. The government appointed in April 2017 remains committed to implementing sound policies and reforms have resumed. However, the outlook is subject to significant risks, including geopolitical risks in the region, weaker-than-expected growth in the euro area and delays in implementing key reforms. To achieve higher, sustainable, and more inclusive growth, reform implementation needs to accelerate, particularly in the areas of governance, the business environment, education, and the labor market.

PLL arrangement. In line with the generally positive assessment of Morocco’s policies by the Executive Board in the 2017 Article IV consultation, staff considers that Morocco continues to meet the PLL qualification criteria and recommends the completion of the third review of the PLL arrangement:

  • Morocco’s economic fundamentals and policy frameworks are sound, the country is implementing (and has a track record of implementing) generally sound policies, and remains committed to maintaining such policies in the future.

  • Morocco meets the PLL qualification criteria, performs strongly in three out of the five PLL qualification areas (monetary, financial, and data), and does not substantially underperform in the fiscal policy, and external position and market access areas. The assessment of performance in the external sector was revised downward for this review to reflect a weaker-than-expected external position. Morocco does not face any of the circumstances under which the Fund might no longer approve a PLL arrangement.

  • End-September 2017 quantitative indicative targets on the fiscal deficit and international reserves were met. The authorities have not drawn on the arrangement and continue to treat it as precautionary

Approved By

Adnan Mazarei and Vitaliy Kramarenko

The team consisted of Nicolas Blancher (head), Lorraine Ocampos, Jean Frédéric Noah Ndela, Babacar Sarr (all MCD), Andrea Presbitero (SPR), and Virginia Alonso-Albarran (FAD). The discussions took place in Rabat and Casablanca from October 25 to November 7, 2017. Jihad Azour (MCD) joined the team for the concluding meetings. Gregory Auclair, Geraldine Cruz, and Ravaka Prevost (MCD) assisted in the preparation of the report.

The mission met with the Head of Government Mr. El Othmani, the President of the Chamber of Representatives Mr. El Malki, the Minister of Economy and Finance Mr. Boussaïd, the Minister Delegate of General Affairs and Governance Mr. Daoudi, the Minister of Labor and Professional Integration Mr. Yatim, the Governor of the Central Bank Mr. Jouahri, and other senior officials and representatives of civil society. Mr. Daïri (OED) participated in most meetings.

Contents

  • Glossary

  • RECENT DEVELOPMENTS AND PERFORMANCE UNDER THE PROGRAM

  • A. Recent Developments

  • B. Policy Implementation

  • OUTLOOK AND RISKS

  • REVIEW OF PLL QUALIFICATION

  • A. General Assessment

  • B. Assessment of Specific Criteria and Track Record

  • OTHER PROGRAM ISSUES AND POST-PLL STRATEGY

  • STAFF APPRAISAL

  • BOX

  • 1. External Stress Index

  • FIGURES

  • 1. Real and External Developments

  • 2. Fiscal Developments

  • TABLES

  • 1. Selected Economic Indicators, 2012–22

  • 2a. Budgetary Central Government Finance, 2012–22 (Billions of dirhams)

  • 2b. Budgetary Central Government Finance, 2012–22 (Percent of GDP)

  • 3. Balance of Payments, 2012–22

  • 4. Monetary Survey, 2011–17

  • 5. Financial Soundness Indicators, 2010–17

  • 6. Capacity to Repay Indicators, 2016–22

  • APPENDIX

  • I. Written Communication

Glossary

ARA

Assessing Reserve Adequacy

BAM

Bank al-Maghrib

EA

Euro Area

EBA

External Balance Assessment

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 and Liquidity Line

REER

Real Effective Exchange Rate

SDR

Special Drawing Rights

SME

Small and Medium Enterprises

SOE

State-Owned Enterprise

TA

Technical Assistance

VAT

Value-Added Tax

VIX

Volatility Index S&P 500

WEO

World Economic Outlook

Front Matter Page

Press Release No. 18/07

FOR IMMEDIATE RELEASE

January 19, 2018

International Monetary Fund

Washington, D.C. 20431 USA

Telephone 202–623–7100

Fax 202–623–6772

www.imf.org

Morocco: Third Review Under the Arrangement Under the Precautionary and Liquidity Line (PLL)-Press Release; Staff Report; and Statement by the Executive Director for Morocco
Author: International Monetary Fund. Middle East and Central Asia Dept.