Rabat – Morocco’s central bank is ready to move forward with the next phase of the flexible exchange regime, said Nadia Fettah Alaoui, the Finance and Economy Minister on Monday.
Alaoui explained in an interview with SkyNewsArabia that Morocco has been able to implement a 5% flexible exchange rate despite grappling with recent fluctuations in the global economy.
She elaborated: “Despite pressures, we remained within the interval of 5% without needing any intervention from the central bank.” The Moroccan minister added that the country is now focused on “preserving the macroeconomic balances, as we emerge from the consecutive shocks before we move to the next level of flexible exchange rate.”
She further confirmed that the central bank, Bank Al-Maghrib (BAM), is convinced that the economy has reached a level that would allow for the next level of progress in fiscal reform.
Read also: BAM Governor: Morocco Is Not Ready for New Phase of Exchange Rate Reform
Morocco first initiated the voluntary and gradual transition from a fixed to a more flexible exchange rate regime in January 2018. Following that decision, the dirham’s fluctuation band went from ±0.3% to ±2.5%, before reaching 5% in 2020.
A fixed exchange rate means that Morocco’s central bank had control over the rate of the dirham to other currencies, and could oversee macroeconomic stability.
The country’s move to adopt a flexible exchange rate is in line with the state strategy to liberalize the economy and make it more open. However, adopting a flexible exchange rate means a currency is highly exposed to fluctuating supply and demand.
The minister’s minister’s upbeat comments contrast with a recent statement by the governor of Morocco’s central bank, Abdellatif Jouahri.
Following a BAM quarterly board meeting in March, Jouahri told the press that Morocco was “not ready for the second phase of the flexible exchange rate form.”
Morocco would not move to the second phase of the flexible exchange rate reform “even at the insistence of the International Monetary Fund (IMF),” stressed the BAM chief.
For him, Morocco needs to ensure fiscal sustainability in the medium term before moving to the next stage of reform. This means that the central bank should also improve its capacity to manage both foreign exchange reserves and inflation targeting before moving forward with reform.
“I will only recommend the transition to the new phase of the flexible exchange rate regime when I am convinced that the Moroccan economic fabric is ready for it,” he pledged.
