Via IMF (Den Internationale Valutafond)

IMF Staff Completes 2020 Article IV Mission with Morocco

November 2, 2020

press releases include statements of IMF staff teams that convey preliminary
findings after a visit to a country. The views expressed in this statement are
those of the IMF staff and do not necessarily represent the views of the IMF’s
Executive Board. Based on the preliminary findings of this mission, staff will
prepare a report that, subject to management approval, will be presented to the
IMF’s Executive Board for discussion and decision.

  • The prompt response of the authorities has helped contain the economic and social impact of the health crisis. Still, like many other economies in the world, Morocco’s economy is expected to experience a deep recession this year.
  • IMF staff expects GDP growth to rebound next year to 4.5 percent as the effects of the drought and pandemic wane, but considerable downside risks remain.
  • Morocco has taken decisive efforts to expand social assistance this year. IMF staff agrees that a comprehensive reform of the social protection system will be more urgent after the pandemic.

An International Monetary Fund (IMF)
staff team led by Roberto Cardarelli conducted a remote mission from October 19
to November 2, 2020 in the context of the 2020 Article IV consultation with

At the conclusion of the mission, Mr.
Cardarelli issued the following statement:

“Despite the prompt response of the
authorities, the global pandemic has not spared Morocco and exerted a heavy
toll on its population, as in many other countries in the world. The IMF mission
would like to express its solidarity with all Moroccans who have been impacted by
the health crisis, and to those who have worked incessantly at all levels of
society to help their fellow citizens cope with its consequences.  

“The combined effect of the drought and
the pandemic is expected to cause contraction of GDP in 2020 between 6 and 7
percent, depending on the evolution of the health crisis, as well as a spike in
unemployment rate. The fiscal
and external deficits are expected to widen, on the back of lower tax revenues
and tourism receipts, respectively. Still, the resilience of remittances and
lower imports have contained Morocco’s external financing needs, and
international reserves remain comfortably above last year’ levels also thanks
to the purchase of the IMF precautionary liquidity line in April (see
Press Release No. 20/138
) and the greater recourse to external financing.
IMF staff expects GDP growth to rebound next year to 4.5 percent as the effects
of the drought and pandemic wane, but there are considerable downside risks
around this baseline projection.

fiscal policy stance has been eased appropriately in 2020. Tax revenues have
fallen sharply, and spending measures have been put in place to minimize the
economic and social impact of the crisis. Among these measures, wage subsidies,
cash transfers to households in the informal sector, and the extension of
credit to firms, have sustained domestic demand, protected the most vulnerable,
and supported the productive system. The 2021 Budget continues to support the
recovery over the next few years, mainly through the impulse to investment and
the reforms of the social protection system announced by the authorities. Staff
welcomes the authorities’ plans to support the recovery in 2021. It also agrees
with the authorities that the process of fiscal consolidation should be gradual
and begin only once the economic recovery becomes well anchored. While
acknowledging the exceptional uncertainty over the timing and pace of the
recovery, staff recommends starting to reduce the public-debt-to GDP ratio from
2022 under its baseline projections. A slower-than-expected economic recovery
on the other hand would call for a delayed fiscal adjustment. Measures to
extend the tax base and increase the progressivity of the tax system, further
public administration reforms to rationalize spending, and the authorities’
privatization program would help rebuild the fiscal buffers while financing the
extension of social protection programs.

al-Maghrib (BAM) has taken decisive actions to mitigate the impact of the
pandemic on the real economy and the financial sector. Staff supports the
accommodative monetary stance, which should be maintained until there are signs
that inflation has begun to increase. BAM envisages to use all policy tools
available to avoid further economic damage, if downside risks were to
materialize. Greater exchange rate flexibility would benefit the Moroccan
economy by helping preserve international reserves and international
competitiveness, through better absorbing the effects of external shocks. The
authorities are continuing to work to ensure that the transition to a new phase
of the monetary policy regime will occur smoothly and at the right moment.

have been relatively resilient amid the pandemic, helped by relatively sound
initial capital and liquidity positions and the strong response by BAM. Staff
welcomes BAM decision to ask banks for increased provisioning and for
suspending the distribution of dividends this year to build buffers against a
potential deterioration of banks’ credit portfolio soon. BAM continues its
active monitoring of the impact of the crisis on asset quality, while also
making further progress in coordination with the Ministry of Finance to
finalize the resolution framework and so reinforce the authorities’ toolkit.

on the structural reform agenda is essential to solidify the recovery from the
pandemic and achieve stronger, resilient, and more inclusive growth, one that
improves the standard of living for all Moroccans. Staff congratulates the
authorities’ decisive efforts to expand social assistance this year and agrees
that a comprehensive reform of the social protection system has become more
urgent after the pandemic. The extension of health care insurance to all
Moroccans would contribute to increase access to higher quality services, while
the harmonization of all current social assistance programs under a unified
social registry would improve efficiency and targeting. The mission also
supports the announced reform of state-owned enterprises, that should create
the conditions for a more efficient public sector and boost private sector
development. Finally, the mission appreciates recent progress in preparing the
legal framework for the digitalization of the public administration and the
simplification of its procedures, implementing the education reform, including
the overhaul of the vocational and professional formation system, improving
governance and fighting corruption.

team would like to thank the Moroccan authorities and representatives of the
public and private sectors and civil society with whom it had the opportunity
to meet for their cooperation and productive discussions.”

Background information

Since 2012, Morocco benefited from four
successive PLL arrangements with the IMF. On April 7, 2020, the Moroccan
authorities purchased all available resources (about US$ 3 billion) under the
Precautionary and Liquidity Line (PLL) arrangement (see
Press Release No.20/138
). This was the first time the authorities drew on
funds available under the PLL, to cope with the unprecedented shock of the
COVID-19 pandemic.

IMF Communications Department


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