IMF unlocks $496m in funding for Morocco

Fund says structural reforms are needed to make Morocco’s economy stronger and more resilient

IMF spring meeting signs in Washington in April 2024. Bloomberg

The International Monetary Fund's executive board on Tuesday unlocked $496 million in funding for Morocco.

The Moroccan economy continued to show resilience in response to negative shocks, in a testament to the country’s strong economic policies and frameworks, Kenji Okamura, IMF deputy managing director and acting chairman, said in a statement.

The disbursement was approved after the fund's leadership approved the third review of its Resilience and Sustainability (RSF) arrangement with Morocco. The third review's completion brings total disbursement under the arrangement to about $1.24 billion.

The IMF approved Morocco's 18-month RSF arrangement in September 2023 to support the country's transition to a green economy and strengthen its resilience against natural disasters.

It came shortly after a 6.8-magnitude earthquake struck the country, killing almost 3,000 people. It was Morocco's deadliest earthquake in more than six decades. The earthquake struck about one month before the 2023 IMF and World Bank Annual Meetings in Marrakech.

The IMF's executive board said Morocco's economy, growth of which was expected to slow “only modestly” to 3.2 per cent in 2024, was resilient despite another year of drought.

The country's gross domestic product is projected to increase to about 3.7 per cent in the next few years, which will be helped by its structural reform agenda and new infrastructure projects.

“These reforms are essential to making growth stronger, more resilient, job-rich, and more inclusive,” Mr Okamura said.

However, the Washington-based lender noted that unemployment remains high at about 13 per cent, mostly due to losses in the agricultural sector. Inflation has fallen in the North African country, which has allowed its central bank to issue a handful of interest rate cuts.

Morocco's central bank lowered rates for a second consecutive time on Wednesday to 2.25 per cent, down from 2.5 per cent. The central bank expects inflation to fall about 2 per cent over the next two years.

IMF staff conducted a mission to Rabat last month. At the time they said structural reforms should focus on strengthening job growth and that strong domestic demand was boosting economic growth.

They welcomed reforms to Morocco's tax system, and in including an assessment of climate change risk to Rabat's medium-term fiscal framework. They also saw progress in the Mohammed VI Investment Fund, which the IMF said should help small and medium-sized enterprises receive equity financing.

The third review was the final one of Morocco's RSF programme. Six of the seven measures scheduled for review were implemented.

“These measures will help improve the management of scarce water resources, further liberalise the electricity sector, and address the climate risks on the stability of the fiscal position and the financial system,” Mr Okamura said.

The IMF said gradually introducing a carbon tax was not implemented because Moroccan authorities needed to conduct a further analysis on its impact.