IMF’s $3.47b loan to help economic reform in Morocco


The IMF has approved a two-year, $3.47 billion liquidity facility for Morocco; it was announced by the IMF. The funds will help Morocco in continuing its economic reforms and further strengthen its growth prospects.

The arrangement is under the IMF’s Precautionary and Liquidity Line, which provides insurance against external shocks in light of uncertainty worldwide. This will help the government to continue with their reform agenda aimed at promoting growth by addressing challenges such as high youth unemployment (about 21% in 2015), low female labor force participation and boosting competitiveness.

After two previous precautionary and liquidity arrangements – approved in 2012 and 2014 – Morocco has implemented reforms such as modernizing the budget framework, enacting energy subsidy reforms, strengthening the domestic financial sector and, most recently, improving the civil service pension system.

Facing potential external shocks

These efforts, as well as a more favorable external environment in recent years, have helped the Moroccan government to prevent big declines in domestic and external imbalances. Morocco is still facing potential external shocks such as a slowdown in the Euro area, increased volatility in the financial markets and regional spillovers – such as heightened geopolitical risks that would lead to reduced tourism and increased oil price volatility – which could reverse some of the recent achievements.

The new liquidity line arrangement can support the authorities’ efforts to strengthen macroeconomic stability and economic resilience further, even if these external shocks materialize.

Strong reform progress

The IMF says that despite slow growth in the Euro Area – to which Morocco has close economic links – the country’s strong policies and domestic reforms, combined with favorable oil prices, have helped the economy go forward.

The Moroccan authorities have implemented key reforms such as Liberalizing fuel product prices, expanding social programs targeting most vulnerable groups, adopting a new organic budget law and banking law that will considerably strengthen its fiscal and financial sector policy frameworks.

The government is also working to enforce civil service pension reform and finalize a new central bank law aimed at strengthening its independence and transparency.

The Rabat government has implemented significant reforms to diversify the economy further. These efforts are producing positive results as reflected in the rapid emergence of new and higher value-added industries (automobile, aeronautics, and electronics), which now provide Morocco with more export revenues than traditional sectors such as agriculture or phosphates. The country has also further developed its tourism industry.

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