Rabat – Morocco’s Ministry of Finance and the central bank, Bank Al-Maghrib, announced the country’s readiness to expand the dirham’s band of fluctuation to 5%.
The ministry said the country will enter the next phase of its currency reforms on Monday, March 9. The move is part of Morocco’s initiative to gradually expand the dirham reform process.
Bank Al-Maghrib launched the process to liberalize the Moroccan exchange rate on January 15, 2018, to improve the currency’s flexibility in the face of external market shocks such as the 2008 global recession.
The reforms peg the Moroccan dirham to a currency basket of the Euro and US dollar, weighted 60% to the Euro and 40% to the US dollar.
Before the reforms, Morocco’s currency operated on a fixed exchange rate. The dirham could only be traded within a range of 0.03% above and below the established exchange rate. Morocco then introduced a floating exchange rate in January of 2018, increasing the rate from 0.03% to 2.5%.
Morocco’s top bankers are ambitious about the reforms.
“For us, the reform aims to absorb external shocks and boost Morocco’s competitiveness,” said the governor of Bank Al-Maghrib, Abdellatif Jouahri, in October 2019.
International institutions, including the International Monetary Fund (IMF), encouraged Morocco to introduce a more flexible exchange rate.
In July 2019, the IMF advised Morocco to “use the current window of opportunity” to expand its exchange rate flexibility.
During her visit to Morocco in February, IMF Chief Kristalina Georgieva extolled Morocco’s decision to advance towards the next step of dirham flexibility reforms.
She said the reforms consolidate Morocco as a model for achieving “inclusive” growth in the region.
