Morocco maintains strong international reserves despite the intense economic strain of the COVID-19 pandemic and seasonal drought.
Rabat – Morocco’s central bank, Bank Al-Maghrib, announced it injected MAD 91 billion ($9.25 billion) from May 7 to 13. During the same period, the Dirham appreciated by 0.23% against the Euro and by 0.89% against the Dollar. Meanwhile, the interbank rate remained at 2%.
Morocco’s net international reserves amounted to MAD 278.6 billion ($28.33 billion) on May 8, a 19.9% increase compared to the same period in 2019 and up from earlier this year.
International reserves are external assets that are readily available to, and controlled by, a country’s monetary authorities. According to the International Monetary Fund (IMF), they consist of foreign currencies, other assets denominated in foreign currencies, gold reserves, special drawing rights (SDRs), and IMF reserve positions.
International reserves are funds central banks exchange on an international level. The aim of accumulating international reserves is to increase liquidity to ultimately advance national development and maintain financial stability.
The report of the 19.9% jump comes after Morocco drew for the first time on a $3 billion IMF credit line made available in 2018 due to the intense economic strain of the COVID-19 pandemic and seasonal drought.
In its annual macroeconomic and rate report, Moroccan investment bank CDG Capital predicted Morocco’s foreign exchange reserves, which are included in net international reserves, to face negative impacts from the decline in the tourism balance, remittances from Moroccans residing abroad (MREs), and foreign direct investment (FDI).
“On the basis of a 50% drop in the travel balance, 30% in MREs transfers and 42% in FDI, the overall net flow should fall from MAD 87.3 billion to MAD 54.5 billion in 2020,” CDG Capital predicted.
In early April, Minister of Economy Mohamed Benchaaboun said if foreign reserves are significantly impacted, the country may seek support from the International Monetary Fund. Morocco did so days later.
It remains to be seen if Morocco will maintain stable international reserves or if the COVID-19 crisis will deliver further blows.