IMF board approves $5 billion flexible credit line for Morocco

The two-year arrangement will support the North African country amid the worsening global economic environment and recurrent droughts, lender says

A market in Rabat. Moroccan authorities intend to treat the IMF flexible credit line arrangement as precautionary, the fund said. EPA

The International Monetary Fund's executive board approved a $5 billion flexible credit line for Morocco to boost the North African country's external buffers, provide insurance against possible risks and prevent crises.

Moroccan authorities have stated their intention to treat the two-year arrangement as "precautionary", the Washington-based lender said in a statement on Tuesday.

"Morocco’s very strong macroeconomic policies and institutional framework have allowed its economy to remain resilient to the multiple negative shocks that have occurred over the past three years, including the pandemic, two droughts, and the spillovers from Russia’s war in Ukraine," Antoinette Sayeh, deputy managing director and acting chair at the IMF, said following the executive board's discussion.

"Despite this resilience, the Moroccan economy remains vulnerable to a worsening of the global economic and financial environment, higher commodity price volatility and recurrent droughts."

Against this backdrop, the credit line will provide the country with further protection against risks, Ms Sayeh said.

Morocco's economy is projected to grow 3.1 per cent this year, from 0.8 per cent last year, the IMF says.

Government gross debt will stand at about 70.1 per cent of its gross domestic product this year, compared with 70.3 per cent a year ago.

The country's inflation rate is projected to reach 4.1 per cent this year, down from 6.2 per cent last year.

Unemployment in the country of about 37 million people is expected to decrease to 10.7 per cent this year, down from 11.1 per cent last year, the IMF estimates.

Morocco had accessed four of the IMF's precautionary and liquidity line arrangements, each amounting to about $3 billion, in 2012, 2014, 2016 and 2018.

The fourth expired in April 2020 when Moroccan authorities tapped into all the available resources under the arrangement to limit the social and economic impact of the Covid-19 pandemic and to maintain an adequate level of official reserves.

The IMF's flexible credit line is designed to meet the demand for crisis-prevention and crisis-mitigation lending for countries with strong policy frameworks and track records in economic performance, according to the fund's website.

Its purpose is to provide financial support to help these countries meet actual or potential balance of payments needs and boost market confidence during a period of heightened risks.

To qualify, countries must meet certain criteria including a track record of steady sovereign access to international capital markets at favourable terms, sound public finances, sustainable public debt, low and stable inflation and a sound financial system.

Morocco qualified "by virtue of its very strong policies, institutional policy frameworks, and economic fundamentals and continued commitment to maintaining such policies in the future", the IMF said.

The Moroccan government plans to exit the arrangement as soon as the 24-month period has ended, depending on the evolution of risks, the fund said.

"The Moroccan authorities remain committed to rebuilding policy margins, delivering a comprehensive policy response to new shocks, and continuing to implement the comprehensive structural reforms needed to make economic growth stronger, more resilient and more inclusive," Ms Sayeh said.