Morocco: First Review Under the Arrangement Under the Precautionary and Liquidity Line—Press Release; Staff Report; and Statement by the Executive Director for Morocco
Author: International Monetary Fund. Middle East and Central Asia Dept.
Publication Date:
23 Oct 2019
eISBN:
9781513517506
Language:
English
Keywords:
ISCR; CR; policy; The Article IV consultation discussion; authority; current account; reform; debt service; inflation targeting; central bank; balance of payments; broad money; Global
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First Review Under the Arrangement Under the Precautionary and Liquidity Line-Press Release; Staff Report; and Statement by the Executive Director for Morocco

Abstract

First Review Under the Arrangement Under the Precautionary and Liquidity Line-Press Release; Staff Report; and Statement by the Executive Director for Morocco

Recent Developments and Performance Under the Program

1. The Executive Board approved a two-year precautionary and liquidity line (PLL) arrangement in December 2018 in the amount of SDR 2.15 billion (or 240 percent of quota), equivalent to about US$3 billion. The arrangement supports the authorities’ policies to strengthen the economy’s resilience and promote higher and more inclusive growth. The 2019 Article IV consultation with Morocco was concluded on May 13, 2019. Executive Directors commended the authorities for implementing sound macroeconomic policies and welcomed the accelerated reforms, which have helped improve the resilience of the Moroccan economy and increase its diversification.

2. Macroeconomic vulnerabilities have been reduced in recent years. The authorities have strengthened macro-economic resilience and implemented difficult reforms, especially regarding the pension system, energy subsidies, fiscal framework, business environment, and financial sector. The transition to greater exchange rate flexibility was initiated in January 2018. Key structural reforms need to be pursued to further enhance macroeconomic resilience and move towards more private sector-led, inclusive and job-rich growth.

3. Economic activity has weakened since 2018, while unemployment declined slightly. In 2018, weaker growth reflected lower agricultural growth, despite a second consecutive year of good cereal harvest, while non-agricultural growth continued at a modest pace due to slow growth in the tertiary sector. Early estimates suggest that growth slowed further in the first quarter of 2019 (2.3 percent against 3.3 percent over the same period last year) due mainly to negative agricultural growth. On the demand side, private consumption continues to be the main driver of growth, while private investment recovered gradually following its decline in recent years (from 30.7 percent in 2008 to 22.8 percent of GDP in 2015). Unemployment declined to 10 percent in the first quarter of 2019 (from 10.5 percent in the first quarter of 2018) but remains particularly high among youth and graduates (about 24.1 percent and 17.1 percent, respectively).

4. Fiscal consolidation slowed down in 2018, but developments through April 2019 have been positive. Despite lower-than-expected grants, the authorities met the end-March 2019 Indicative Target (IT) (deficit of 0.1 percent of GDP against an indicative target of 0.8 percent). This outcome was primarily due to strong revenues (mostly from new taxes to compensate for revenue losses from progressivity in corporate taxation) and continued efforts to contain current spending, while capital spending accelerated slightly. Preliminary data suggest that the fiscal deficit at end-April 2019 was lower relative to the same period last year (1.2 percent of GDP against 1.4 percent). The fiscal stance, as measured by the cyclically-adjusted primary deficit (excluding grants), remains neutral. Public debt is sustainable and decreased slightly to 64.9 percent of GDP at end 2018.

5. Monetary policy has remained accommodative in a context of low inflation and subdued economic and credit growth. Headline inflation declined 0.1 percent y-o-y in March 2019 (compared to a 2.5 percent increase last year) due to lower food and commodity prices, while core inflation was 0.9 percent. Bank-Al-Maghrib (BAM) has kept its policy rate unchanged at 2.25 percent since its last reduction in March 2016. Lending rates have declined marginally, and bank credit growth increased to 5.1 percent (y-o-y) in March 2019 after remaining sluggish throughout 2018 (including for SMEs). Real estate prices are stable.

6. The external position has deteriorated. In 2018, despite continued strong export performance in the automobile and phosphate sectors, the current account deficit widened to 5.4 percent of GDP (against 3.4 percent in 2017) due to higher imports of energy products (reflecting higher oil prices) and capital goods, as well as lower remittances, official grants, and tourism receipts. At the same time, net FDI increased substantially to 2.5 percent of GDP (due in part to one very large transaction). International reserves dropped by US$1.7 billion to US$24.4 billion, equivalent to 5.2 months of imports and 87.1 percent of the Fund’s Assessing Reserve Adequacy (ARA) metric.1 Preliminary data for the first quarter of 2019 suggest some improvements in the trade deficit, but a decline in remittances and tourism receipts (5.7 and 3.5 percent y-o-y, respectively), as well as in net FDI (47.2 percent y-o-y). Exchange rate fluctuations have remained very limited since January 2018, when the authorities announced the widening of the dirham fluctuation band to +/-2.5 percent (from 0.3 percent) on either side of a reference parity (based on a euro/US dollar basket). The central bank has not intervened in the foreign exchange market since March 2018.

7. Bank capitalization is adequate, while non-performing loan (NPL) levels, credit concentration, and expansion in Africa, present risks. Banks’ regulatory capital ratio increased to 14.7 percent as of December-2018. The International Financial Reporting Standard (IFRS9) was introduced in January 2018, requiring banks to upgrade their loan classification and provisioning practices, as well as to increase capital accordingly over a period of five years. NPL ratios remain relatively elevated at 7.7 percent, but provisioning levels are comfortable (about 70 percent). Risks from large credit exposures persist despite strict regulatory limits. The continued expansion of Moroccan banks in Africa provides diversification and profit opportunities but is also a potential channel of risk transmission.2

8. Building on recent progress, reforms are expected to focus on the fiscal and financial policy frameworks, the exchange rate regime, and structural improvements to raise potential growth:

  • Fiscal policy framework. Recent progress includes the continued implementation of the organic budget law (OBL) and the adoption of a deconcentration charter and transparent criteria for the transfer of public resources to regions. Over the medium term, further fiscal consolidation to reduce public debt to 60 percent of GDP by 2024 (64.9 percent in 2018), and to increase fiscal buffers, requires: (i) accelerating tax reforms in line with recommendations from the May 2019 national tax conference, especially to broaden the tax base (e.g., through reduced tax exemptions and fight against fiscal fraud); and (ii) improving the efficiency and quality of public investment and services through a comprehensive civil service reform, strengthened financial oversight of state-owned enterprises (SOEs), implementation of the recent Public Investment Management Assessment (PIMA) recommendations, and sound public financial management at the local level as part of fiscal decentralization.

  • Financial sector policy framework. Progress is being made to upgrade the financial sector policy framework, in line with the 2015 FSAP recommendations, including by increasing supervisory capacity, as well as improving BAM’s stress-testing and macroprudential policy framework with Fund technical assistance. Continued efforts are needed to safeguard banking soundness considering risks exposures and the increasing complexity and cross-border expansion of Morocco’s banks, as well as the forthcoming exchange rate flexibility. In this context, weaknesses identified in Morocco’s AML/CFT framework need to be addressed.3 A draft central bank law, which will strengthen the central bank’s independence and clarify its role for financial stability, has been submitted to parliament. Based on recommendations from the January 2019 safeguards assessment, further amendments will be needed on aspects related to BAM’s autonomy and governance.

  • Exchange rate regime. Greater exchange rate flexibility will benefit Morocco’s economy, helping preserve reserve buffers and competitiveness, and better positioning the economy to absorb external shocks. Preparations for this reform have been completed and current conditions are supportive of a continuation of the gradual and orderly transition. While remaining committed to pursue the transition, the authorities are waiting for the opportune moment to move to the next phase, in the context of a well-structured communication strategy to ensure that economic agents, in particular SMEs, are fully aware of the potential foreign exchange risks and able to manage them. Relaxing the remaining restrictions on capital outflows by residents would only be done gradually and at a later stage, to minimize risks to the transition.

  • Business environment, access to finance, and labor market. Since mid-2018, structural reforms have accelerated in several key areas. Regarding the business environment, the Competition Council was reactivated, and efforts are underway to limit payment delays in the public sector and support private sector development. The authorities also launched a comprehensive financial inclusion strategy which, together with other initiatives (e.g., the strengthened legal framework for collateralization), will improve SME access to finance. Further efforts are needed to improve the quality of education and the functioning of the labor market, and to reduce inequalities and middle-class vulnerabilities through better targeted social programs. Continued implementation of the national strategy against corruption is necessary to reinforce public trust, and specific measures under the national strategy for employment adopted in 2015 should be finalized.

Outlook and Risks

9. Gradually increasing growth, moderate inflation, and stronger external and fiscal buffers are expected over the medium term. These projections assume sustained reform implementation reflecting the government’s commitments, including continued fiscal prudence, progress toward greater exchange rate flexibility, and reforms of taxation, governance, oversight of state-owned enterprises (SOEs), fiscal decentralization, the labor market, and the business environment Greater emphasis is also being put on reducing social and regional inequalities and increasing access to quality public services

  • Growth is expected to remain at 3 percent in 2019 due to weaker-than-expected economic activity in the euro area and a normalization of agricultural output following two years of strong production. Subject to continued reform implementation, growth is expected to reach 4.5 percent over the medium term.

  • Inflation is projected to slow to 0.6 percent in 2019 due to lower increases in commodity and food prices and to stabilize around 2 percent over the medium term.

  • The fiscal deficit is projected to remain at 3.7 percent of GDP in 2019, with privatization receipts reducing the public financing needs to 3.3 percent of GDP. The deficit would decline and stabilize around 3 percent of GDP after 2020 which, together with expected privatization revenues, would contribute to reducing public debt to 60 percent of GDP over the medium term.

  • The current account deficit is expected to decline to 4 percent of GDP in 2019 and 2.8 percent of GDP over the medium term, driven by sustained growth in exports, tourism receipts, and remittances, as well as lower imports, particularly energy products. Foreign direct investment is expected to remain stable at about 2 percent of GDP, and other private flows (including trade credit) would hover around 2 percent of GDP as well. International reserves are expected to reach 100 percent of the ARA metric in the medium term (about 128 percent of the ARA metric adjusted for capital controls).

10. The balance of risks remains tilted to the downside. On the domestic front, delays in implementing key fiscal and structural reforms could reduce future fiscal space and contribute to social tensions, thus adversely affect the external sector (e.g., through lower tourism receipts and FDI inflows) as well as the expected pickup in potential growth. Externally, higher oil prices, weaker growth in the euro area, and geopolitical risks could slow economic activity through lower exports, tourism, FDI flows, and remittances. Increasingly volatile global financial conditions may also increase borrowing costs and weaken investor confidence. On the upside, lower international oil (and butane gas) prices could help further enhance the economy’s resilience and increased regional integration in the Maghreb region could be an added source of medium-term growth for Morocco.4

External Economic Stress Index

Background. The external economic stress index is an indicator of the evolution of the external environment faced by a country. Its use was mandated by the IMF Executive Board for Flexible Credit Line (FCL) and PLL arrangement countries at the time of the review of these instruments in June 2014.1 The index is based on: (i) a consideration of the key external risks facing Morocco; (ii) the selection of proxy variables capturing these risks; and (iii) the choice of the weights to apply to each of these variables. The model was first developed at the time of the 2012 PLL arrangement request.

Risks. The main external risks for Morocco, based on the February 2019 Global Risk Assessment Matrix (G-RAM), are: (i) weaker than expected global growth, particularly in Europe and Morocco’s main trading partners, resulting in lower exports, FDI, tourism, and remittances; (ii) intensification of security risks in parts of the Middle East, Africa, and Europe, resulting in negative sentiment and lower capital inflows and tourism receipts; (iii) tighter global financial conditions, resulting in higher borrowing costs and disruption to portfolio flows; and (iv) large swings in oil prices.

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Morocco: External Stress Index

Citation: IMF Staff Country Reports 2019, 317; 10.5089/9781513517506.002.A001

Sources: WEO; and IMF staff estimates.

Proxy variables. (i) Lower exports, remittances, FDI, and tourism receipts are captured by growth in the euro area (which represents more than 50 percent of Morocco’s trade, FDI, and remittances); (ii) higher oil imports are captured by oil prices; and (iii) the impact of global financial volatility on portfolio flows and borrowing costs are captured by the emerging markets volatility index (VXEEM).

Weights. A data-based approach was used to determine the weights of each proxy variable. Weights are estimated using the balance of payments and IIP data as a share of GDP. The weight on euro area growth (0.580) corresponds to the sum of exports, FDI, remittances, and tourism receipts from Europe. The weight on the VXEEM (0.095) corresponds to the stocks of external debt and equity, and the weight on the change in oil price (0.324) corresponds to oil imports. The three weights are as set at the PLL request stage, in December 2018. The highest weights fall on the euro area growth and oil price (based on their relative contribution to items on the balance of payments/financing needs). The VXEEM has a smaller weight, reflecting the small size of portfolio flows in the financial account.

Baseline scenario. The baseline corresponds to the April 2019 World Economic Outlook (WEO) projections for euro area growth and oil prices. The VXEEM volatility index (VIX) futures at end-March 2019. The graph suggests that, at the current juncture, the level of external economic stress is virtually unchanged relative to the December 2018 request (solid lines). This is due to lower oil price assumptions, which are offset by lower growth in advanced economies, particularly Europe, and improved VXEEM index projections.

Downside scenario. The downside scenario is broadly consistent with staff’s adverse scenario and assumes euro area growth that is 0.5pp lower than the baseline, a US$10 increase in oil prices relative to the baseline, based on historical standard deviations, and an increase in the VXEEM by two standard deviations, similar to the assumption at the time of the PLL request.2 The graph suggests that in a downside scenario, external economic stress is broadly comparable to that at the time of the December 2018 request.

Overall assessment. The external economic stress index for Morocco suggests that external pressures abated between 2012–16, but increased more recently. However, the model does not include a proxy for geopolitical risk (given the difficulty in choosing such a variable). At present, this would suggest a relatively heightened stress index.

1 See “The Review of the Flexible Credit Line, the Precautionary and Liquidity Line, and the Rapid Financing Instrument,” IMF Policy Paper, January 20142 The scenario combines a US$15 increase in oil prices and a US$5 drop consistent with lower growth in the euro area.

Review of PLL Qualification

A. General Assessment

11. Staff assesses that Morocco continues to qualify for a PLL arrangement, in line with the generally positive assessment of Morocco’s policies by the Executive Board during the 2019 Article IV consultation. Morocco meets the qualification criteria for a PLL arrangement and performs strongly in three out of the five PLL qualification areas (financial sector and supervision, monetary policy, and data adequacy), and does not substantially underperform in the other two areas (external position and market access, and fiscal policy).

12. Morocco’s economic fundamentals and institutional policy frameworks are sound, the authorities have a track record of implementing sound policies, and they remain committed to doing so in the future (W-COM.-¶1)• Morocco has met the PLL qualification standard since 2012. Staffs review of the relevant core indicators over the five most recent years confirms this assessment (see below). This strengthens confidence that Morocco will take the policy measures needed to reduce remaining vulnerabilities and will respond appropriately to the balance of payments difficulties that it might encounter:

  • Macroeconomic developments are broadly positive. Growth averaged 3.3 percent during 2012–17 and inflation remained below 2 percent. Fiscal developments were favorable, with contained current expenditures offsetting weaker revenues, although the deficit increased slightly in 2018 due mostly to exogenous factors. On the external front, the current account deficit widened in 2018 due to higher imports of energy and capital goods, as well as lower remittances, official grants, and tourism receipts (which were not offset by sustained export growth in the automobile, phosphates, and aeronautic sectors). The banking system has remained stable. Over the medium term, economic growth is projected to increase steadily in the context of moderate inflation, and the fiscal and current account deficits are expected to narrow. Both public and external debts are sustainable.

  • The authorities have implemented generally sound policies and have recently accelerated structural reforms (W-COM.-¶4). During the last Article IV consultation, concluded on May 13, 2019, the Executive Board commended the authorities for implementing sound macroeconomic policies and welcomed the acceleration in reforms, which have helped improve the resilience of the Moroccan economy and increase its diversification.

  • The authorities are committed to maintain sound policies (W-COM.-¶22). They remain committed to secure strong revenue performance, contain current spending, and reduce public debt to about 60 percent of GDP over the medium term. They are advancing tax and structural reforms aiming to improve public sector governance and efficiency, enhance competition, lower hiring costs, and increase SME financial inclusion, while reducing inequalities (W-COM.-¶12). These reforms are key to raise the growth potential and boost job creation, especially for youth and women.

  • Flexible policy and institutional frameworks allow the authorities to implement needed reforms in the face of shocks. Implementation of the OBL continues to improve the fiscal policy framework, including by maintaining current spending within budgeted levels. Indicators of a country’s ability to undertake countercyclical policy in the event of shocks show that Morocco performs relatively well in the fiscal policy area.5 Morocco scores lower in the monetary policy area, but this criterion is less relevant given Morocco’s pegged exchange rate with horizontal bands arrangement6 BAM has a clear mandate to implement monetary and exchange rate policies, and the authorities are in the process of upgrading their monetary policy regime as part of the transition to greater exchange rate flexibility and inflation targeting. Finally, Morocco performs well relative to its peers in the 2018 Worldwide Governance Indicators on control of corruption and government effectiveness.7

B. Assessment of Specific Criteria

13. Morocco performs strongly in three out of the five PLL qualification areas (financial sector and supervision, monetary policy, and data adequacy) and does not substantially underperform in the other two areas (external position and market access, and fiscal policy). The underlying current account deficit remains large, with a substantial trade deficit, and the external position weakened in 2018. On the fiscal front, public debt is assessed to be sustainable with a high probability and resilient to various shocks. It declined to 64.9 percent of GDP in 2018 after continuously increasing from 56.5 to 65.1 percent of GDP during 2012–17. This qualification assessment has not changed since the request of the PLL arrangement.

External position and market access: Morocco does not substantially underperform in the external position and market access area.

  • Criterion 1—Sustainable external position. Based on the April 2019 external balance assessment (EBA), Morocco’s external position is moderately weaker than implied by fundamentals and desirable policies. The current account deficit narrowed in 2017 but widened substantially in 2018 due to higher imports of energy and capital goods, as well as lower remittances, official grants from the Gulf states, and tourism receipts. The current account deteriorated in spite of strong export performance in the food, phosphate, automobile, and aeronautic sectors. It is expected to gradually improve over the medium term as export growth benefits from the expansion of higher value-added export sectors—reflecting strong FDI in the aeronautics and automotive sectors, and import growth slows in an environment of lower commodity prices. Morocco’s external debt remains low, at 32.7 percent of GDP in 2018, and is expected to decline to about 28.2 percent of GDP in the medium term.

  • Criterion 2—Capital account position dominated by private flows. Private capital flows constitute the largest share of the capital account (at around 80 percent on average between 2015 and 2018), and FDI is their largest component. Access to international financial markets by nonfinancial corporations remains modest compared to other emerging markets, and private external debt is small (about 2 percent of GDP). Loans from bilateral and development partners constitute the bulk of public capital flows.

  • Criterion 3—Track record of steady sovereign access to international capital markets at favorable terms. Morocco has not issued sovereign international bonds since 2014, but the authorities plan to issue a 1-billion-euro bond in 2019.8 The country continues to be rated favorably by major ratings agencies, despite a weaker outlook assessment at the end of 2018.9 Sovereign spreads remained low in 2018, and it is expected that Morocco can tap international markets on a durable and substantial basis—even though the scale or duration of actual sovereign borrowing fell short of core indicators under PLL policy.

  • Criterion 4—A reserve position, which―notwithstanding potential balance of payments (BOP) pressures that justify Fund assistance―remains relatively comfortable. On average, Morocco’s reserves were below 100 percent of the ARA metric in the last three years, but they have not declined below 80 percent of the ARA metric in any of the current and two previous years. At end-2018, reserves were equivalent to 87 percent of the ARA metric and remained adequate according to several metrics (Figure 4): 5.2 months of imports, ample coverage of short-term debt and broad money, and 115 percent of the ARA metric adjusted for capital controls. By 2024, reserves are expected to reach nearly six months of imports, 99 percent of the ARA metric, and 127 percent of the ARA metric adjusted for capital controls.

Figure 1.
Figure 1.

Morocco: Real Sector Developments, 2009–19

Citation: IMF Staff Country Reports 2019, 317; 10.5089/9781513517506.002.A001

Figure 2.
Figure 2.

Morocco: Fiscal Developments, 2009–18

Citation: IMF Staff Country Reports 2019, 317; 10.5089/9781513517506.002.A001

Figure 3.
Figure 3.

Morocco: Financial Developments, 2009–19

Citation: IMF Staff Country Reports 2019, 317; 10.5089/9781513517506.002.A001

Figure 4.
Figure 4.

Morocco: External Developments, 2009–18

Citation: IMF Staff Country Reports 2019, 317; 10.5089/9781513517506.002.A001

Sources: National authorities; and IMF staff estimates.
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CDS Spreads

(2013–19 basis points)

Citation: IMF Staff Country Reports 2019, 317; 10.5089/9781513517506.002.A001

Sources: Bloomberg; and Markit.

Fiscal policy: Morocco does not substantially underperform in the fiscal area.

  • Criterion 5—Sound public finances, including a sustainable public debt position. The authorities remain committed to fiscal sustainability and a track record of sound public finances. A deficit of 3.7 percent of GDP is expected in 2019, and the authorities aim to reduce public debt to 60 percent of GDP over the medium term (against 64.9 percent of GDP in 2018), which will require bringing the fiscal deficit to about 3 percent of GDP by 2020 (W-COM.-¶5).10 Morocco’s public debt is sustainable with high probability and resilient to various shocks and vulnerabilities despite high gross financing needs (which should decline due to longer average maturities achieved in recent years). Future fiscal consolidation is expected to benefit from accelerated tax reforms, including measures to broaden the tax base through reduced exemptions and fight against fraud, simpler VAT regime and corporate tax rates, and better-enforced tax payments by self-employed and liberal professions. In the medium term, civil service reform will be needed to help durably reduce the relatively high wage bill and improve the quality of public services. Institutional mechanisms to control risks from fiscal decentralization are being put in place. The authorities intend to submit to parliament in 2019 a draft law reinforcing the governance and oversight of SOEs, and the forthcoming privatization program will also support SOE performance.

Monetary policy: Morocco performs strongly in the monetary policy area.

  • Criterion 6—Low and stable inflation. In the context of a sound monetary and exchange rate policy framework, inflation has been in the single digits over the last five years. Inflation has decelerated recently, declining 0.1 percent y-o-y in March 2019 and is expected to stabilize around 2 percent in the medium term. The monetary policy framework continues to be based on an exchange rate anchor vis-à-vis a composite basket comprising the euro and the U.S. dollar. The transition to greater exchange rate flexibility initiated in January 2018 is expected to last several years and to lead to inflation targeting (W-COM.-¶20), allowing the economy to better absorb external shocks. In staff’s assessment, this transition is likely to proceed smoothly as preconditions are in place and Morocco is moving from a position of strength, with reasonable fiscal and external buffers, a resilient financial sector, and restrictions on capital outflows by residents.

Financial sector soundness and supervision: Morocco performs strongly in the financial sector area.

  • Criterion 7—Sound financial system and absence of solvency problems that may threaten systemic stability. Banks have adequate capital buffers and benefit from stable funding (mainly non-remunerated deposits). The 2015 FSAP stress tests showed that the banking system could withstand severe shocks. NPLs remain relatively high at 7.7 percent, but provisioning levels are comfortable (70 percent). Risks from large credit exposures persist despite strict regulatory limits. Moroccan banks’ expansion into Africa provides diversification and profit opportunities, but also increases risks given the riskier operating environment and lower regulatory standards in some host countries.

  • Criterion 8—Effective financial sector supervision. Bank supervision capacity is improving along the lines of the 2015 FSAP recommendations. Together with recent enhancements to the macroprudential policy framework, the oversight of Moroccan banks expanding into Africa has intensified, in close collaboration with supervisory agencies in host countries. To reduce large credit exposures, since 2016, corporate groups are required to prepare consolidated financial statements and risk weights have been raised for large connected exposures. More broadly, bank supervision is becoming more risk-based and forward-looking and the authorities are in the process of addressing weaknesses identified in Morocco’s AML/CFT framework (W-COM.-¶19).

Data adequacy: Data provision and quality are fully adequate.

  • Criterion 9—Data transparency and integrity. Overall data quality continues to be adequate to conduct effective surveillance and program monitoring. Morocco subscribes to the Special Data Dissemination Standard. The authorities are committed to improving data quality and access.

Other Program Issues

14. The end-March 2019 quantitative indicative targets (IT) for the fiscal deficit and net international reserves (NIR) were met. Specifically, the end-March 2019 fiscal deficit IT was met without adjustments, and with a substantial margin once the adjustor for grants is considered. The end-March 2019 NIR target was met by a small margin once the adjustor for multilateral and bilateral loans and grants was applied. However, the NIR (relatively to the level envisaged at the time of the PLL request) was lower than projected by US$0.5 billion, reflecting a widened current account deficit in 2018 (by nearly US$3 billion between end-2017 and end-2018) and thus a slower increase in reserve accumulation.

15. Should Morocco draw on the entire amount available, it would have adequate capacity to repay the Fund, while credit and liquidity risks to the Fund would remain low (Table 6).11 Whereas the authorities continue to treat the PLL arrangement as precautionary, in the event of a drawdown, Fund obligations would represent only a small share of Morocco’s total external debt (a maximum of 5.3 percent over the projection period), gross international reserves (11.6 percent), and exports (6.7 percent). In addition, the impact of the PLL arrangement on the Fund’s liquidity and potential exposure continues to be moderate. The commitment to Morocco is modest and the PLL arrangement reduces the Fund’s forward commitment capacity only marginally.

Table 1.

Morocco: Selected Economic Indicators, 2015–24

article image
Sources: Moroccan authorities; and IMF staff estimates.

Refers to the macro framework for the Request for an Arrangement Under the PLL in Country Report No. 19/24.

Based on revised ARA weights.

Table 2a.

Morocco: Budgetary Central Government Finance, 2015–24

(Billions of dirhams)

article image
Sources: Ministry of Economy and Finance; and IMF staff estimates.

Refers to the macro framework for the Request for an Arrangement Under the PLL in Country Report No. 19/24.

Includes capital transfers to public entities.

Table 2b.

Morocco: Budgetary Central Government Finance, 2015–24

(Percent of GDP)

article image
Sources: Ministry of Economy and Finance; and IMF staff estimates.

Refers to the macro framework for the Request for an Arrangement Under the PLL in Country Report No. 19/24.

Includes capital transfers to public entities.

Does not include deposits at the Treasury from third parties (SOEs, private entities and individuals).

Table 3.

Morocco: Balance of Payments, 2015–24

(In billions of US dollars, unless otherwise indicated)

article image
Sources: Ministry of Finance; Office des Changes; and IMF staff estimates and projections.

Refers to the macro framework for the Request for an Arrangement Under the PLL in Country Report No. 19/24.

Based on WEO data for actual and projections.

Excluding the reserve position in the Fund.

Based on revised ARA weights.

Public and publicly guaranteed debt.