Rabat - Moroccan Prime Minister Saad Eddine El Othmani unveiled the dirham fluctuation bands, announcing the matter of the exchange rate regime was not of urgency and needed additional time to “study certain impacts,” during his appearance on a political program broadcast on Al Aoula and 2M on Saturday.
Rabat – Moroccan Prime Minister Saad Eddine El Othmani unveiled the dirham fluctuation bands, announcing the matter of the exchange rate regime was not of urgency and needed additional time to “study certain impacts,” during his appearance on a political program broadcast on Al Aoula and 2M on Saturday.
While the announcement of the first phase of liberalizing the Moroccan currency was expected to be made by Minister of Economy and Finance, Mohamed Boussaid and Governor of Bank Al Maghrib, Abdellatif Jouahri on June 29, it was ultimately El Othmani who raised the veil on the future fluctuation bands of the Dirham.
During the interview on the night of July 1, the head of government was asked about the reform of the exchange rate regime by Samir Chaouki, editor of the daily newspaper Inspirations Eco. El Othmani said that what is currently proposed is to change the bands of fluctuation of the Dirham from 0.6 percent currently to 5 percent, meaning that the Dirham will either drop or rise by 2.5 percent relative to the reference price, against the current ±0.3 percent.
±2.5 percent is an extremely conservative margin which in no way justifies recent speculations regarding the risk of the Dirham’s devaluation. At worst, the correction in the national currency would be 2.5 percent at its peak.
When asked about these speculations, El Othmani, who had already received Jouahri and Boussaid for a meeting on the subject, was well acquainted with the matter. The prime minister repeated the arguments of Bank Al Maghrib (BAM), giving no precise or convincing explanation for the last minute decision to postpone the flexibilisation in question.
Bank Al Maghreb had scheduled a press conference on June 29 to announce the official launch of the gradual floating of the dirham, but the event was canceled the night before and no further details were given.
El Othmani stated that BAM was in fact ready to make the official announcement, but it became apparent that more time was needed to “study certain impacts” of the floating of the dirham.
Since the Moroccan Central Bank announced its decision in early 2016 to switch to a flexible exchange rate regime, the general public has expressed confusion at the absence of any public discussion on the matter. Moreover, many have questioned the role of the Executive in such crucial matter.
The prime minister tried to reassure the public, saying that the government will make the decision through its finance department, but the announcement will be made through Bank Al-Maghrib.
El Othmani explained that it will be up to the Central Bank to monitor the currency and take appropriate measures, and added that while the tools necessary to preserve these new bands are identical to those currently used, some additional monetary tools need to be added.
“The decision will be made at the right time and we are not in an emergency,” said the head of government. “It is up to Morocco to make this decision. Financial institutions are consulted for advice, nothing more.”
He recalled that the reform is being studied by BAM in collaboration with the Ministry of Finance since 2006. BAM and other institutions, including the Ministry of Finance have deemed the timing to be opportune, due to improved economic fundamentals.
El Othmani refutes comparisons with other countries, including Egypt. For him, the Moroccan economy can afford to switch to a flexible exchange regime as foreign exchange reserves are sufficient. He also assured that all efforts will be deployed to “protect the purchasing power of Moroccans.”
The Moroccan Head of Government also revealed that the date of implementation of the new regime had not yet been decided, as studies were still ongoing. However, before the postponement of the joint conference of Bank Al-Maghrib and the Ministry of Economy and Finance, originally scheduled for Thursday, June 29, many speculated that the implementation of the new regime would begin on Monday, July 3.
