The governor of the central bank warned in his annual report in July that Morocco’s current economic model won’t meet the growing demands of citizens.
Morocco first introduced a floating exchange rate in January of 2018, increasing the rate from 0.03% to 2.5%.
The country however took a break in 2019 for “itrs 2018 push for a more flexible exchange rate due to an economic slowdown, Bloomberg reported.
Jouahri said that now is the right time to resume the flexible foreign exchange regime to “face external shocks.”
“For us, the reform aims to absorb external shocks and boost Morocco’s competitiveness,” the BAM governor said.
He said the International Monetary Fund (IMF) considers this time is “opportune” to go back to the reforms.
“The timing is the question and should be well chosen,” he added.
Jouahri noted that the central bank will “distance” the country’s currency from the trading basket and give the market room to fix the dirham’s rates.”
He added that supply and demand will determine the dirham’s value.
In July the IMF urged Morocco to expand its exchange rate flexibility by again increasing the float of the MAD.
The IMF’s Executive Directors said in a report, “They welcomed the beginning of the transition to greater exchange rate flexibility last year which will help the economy absorb potential external shocks and remain competitive. They encouraged the authorities to use the current window of opportunity to continue this reform in a carefully sequenced and well-communicated manner.”
With heavy external debts, Morocco’s economy was overwhelmed and unable to meet citizens’ growing demands, Jouahri emphasized in his annual report on the Moroccan economy, which he read in a meeting with King Mohammed VI on July 29.
During the meeting, Jouahri presented the central bank’s annual report on the economic situation for the 2018 financial year.
The report stressed the need for a new economic model, pointing out that Morocco’s economic performance in 2018 failed to meet the “growing social expectations.”