Morocco’s financial performance was near-impeccable in the past year, reflecting the success of reforms the country launched.
Rabat – While a number of structural hurdles continue to hurt the Moroccan economy, the country’s financial reforms have paid visible dividends in the past months. The success is reflected in the improved performance and resilience of the dirham, Morocco’s top banking authorities have suggested.
Resilient MAD
Speaking at a conference yesterday in Rabat on “Assessing the Dirham’s First Year of Flexibility,” an allusion to the IMF-approved Precautionary and Liquidity Line (PLL), Mounir Razki, the banking operations chief at Bank Al-Maghrib (BAM), Morocco’s central bank, said that Morocco can take pride in its “highly resilient” currency.
The market value and prospects of the Moroccan dirham (MAD) look more promising than they have ever been in recent years, according to the conference’s speakers.
In terms of flexibility and resistance to market shocks and vulnerabilities, the first year of Morocco’s two-year PLL has been “positive in majority,” Razki said. He argued that in spite of persisting economic fragilities such as the budget deficit, Morocco’s economy has shown signs of resilience in the past twelve months.
Razki added that the success of the first year of the PLL shows the preparedness of Morocco’s economic institutions as well as the existence of a good basis to implement the flexibility process.
Contrary to expectations that the project could downgrade the dirham exchange rate and make it considerably weaker, the currency’s rates have been significantly positive. Since early January, the dirham exchange rate has evolved in the interval of more or less than 2.5 percent, indicating that the currency has gained in strength and value.
Successful PLL
Hassan Boulaknadal, director of the foreign exchange bureau, echoed Razki’s optimism in the potential of Morocco’s currency market.
In addition to positive exchange rates, another sign of the dirham’s improved flexibility process was witnessed in Moroccan banks’ unprecedented level of liquidity and autonomy during the period since the launch of the PLL.
Boulaknadal explained that since March of last year, no Moroccan bank has received foreign exchange reserves from BAM.
For both speakers, the banks’ high autonomy level means they, too, have been “put in a comfortable position.”
Promising prospects
When the IMF approved Morocco’s PLL, it said, “The new PLL arrangement will provide insurance against external shocks and support the authorities’ efforts to further strengthen the economy’s resilience and promote higher and more inclusive growth.”
While it is too soon to provide a complete assessment of the project, it is visible that Morocco is on track, according to Razki and Boulaknadal.
In terms of internal transactions, a strong exchange rate for the dirham also means that Moroccan importers will register a significant boost in their engagement with foreign markets.
The overwhelmingly positive balance-sheet of Morocco’s financial sector is expected to pave the way for the second phase of the flexibility project.
However, the speakers cautioned that transition to the next phase should not be made in a rush. Despite the achievements and existing assets, a successful transition requires more preparation and a cautious attitude to the vulnerabilities of the financial market, he noted.
The news of a strong MAD comes as Morocco engages in efforts to boost its competitiveness and investment attraction.
Over the past three to five years, a number of international financial institutions, including the IMF, have applauded Morocco’s efforts towards improving its business and investment sectors.
According to IMF Deputy Managing Director Mitsuhiro Furusawa, such measures mean that the country is making “significant strides” to make its economic growth more inclusive and its financial market less vulnerable to external shocks and imbalances.
