In March, the IMF announced it was meeting to discuss a new support request from Morocco, which is implementing structural reforms to strengthen its economy in a global inflationary context. The institution has just approved a two-year financing program to support the country.  

Morocco recently secured an IMF agreement for the disbursement of 3.7 billion SDRs equivalent to $5 billion. The information was revealed by the Fund in a statement issued on Monday, April 3.

The two-year agreement is for a Flexible Credit Line (FCL) to help the Cherifian kingdom regain flexibility in economic policy, while authorities are implementing a structural reform program designed to strengthen the national economy affected by external shocks. Rabat plans to consider the new financing as a precautionary measure that will bolster its foreign exchange reserves and provide temporary insurance against potential risks over the agreement period.  

The Flexible Credit Line was designed to meet the financing demand of countries with strong economic policies and track records in preventing and resolving crises. Thanks to its strong economic fundamentals, the Cherifian kingdom won IMF approval just one month after the institution met to discuss its financing request.

“Since 2012, Morocco had benefited from four successive Precautionary and Liquidity Line (PLL) arrangements, amounting each to about US$ 3 billion. [...]  While the PLL arrangements have served the country well in the past, Morocco’s very strong fundamentals and institutional policy frameworks, sustained track records of implementing very strong policies, and continued commitment to maintaining such policies in the future all justify the transition to an FCL arrangement,” the IMF indicates.

The agreement comes after a 2022 fiscal year marked by rising inflation (8.3% in December). Despite the measures adopted by the government and the Central Bank, price increases have accelerated -with an 8.9%  inflation in January- driven by a surge in food prices.

In that context, although growth is expected to exceed 3% this year, Morocco plans to continue the reforms announced last year, including the deployment of an allowance system targeting the most vulnerable. This strategy will require the authorities to mobilize significant financing and at the same time find the resources to protect vital economic sectors.

Moutiou Adjibi Nourou