Morocco will not look to renew IMF aid

The country says the 'facility has fulfilled its mission and that there is no utility in renewing it again'

Morocco will not renew its IMF liquidity line. Alvaro German Vilela / Alamy

Morocco will not seek to renew its $3.47 billion liquidity line with the IMF when it expires in July but could seek an alternative arrangement with the international lender to suit its strengthening economy, the country’s finance minister said.

Morocco took out a two-year precautionary and liquidity line from the IMF in the aftermath of the 2011 Arab uprisings that shook governments around the region, and renewed the facility twice without drawing on it.

Finance Minister Mohamed Boussaid said the IMF's support had helped the North African country carry out tough reforms, including the liberalisation of the foreign exchange regime, and the liquidity line was no longer needed.

“Morocco has said that this facility has fulfilled its mission and that there is no utility in renewing it again as the macroeconomic framework and indicators are satisfactory,” he said in Marrakesh. “But this doesn’t mean the good relationship we have with the IMF shouldn’t continue.”

Moroccan Central Bank Governor Abdellatif Jouahri told Bloomberg on Monday that the shift toward a looser currency peg will help qualify Morocco for a flexible credit line, which is designed for stronger economies. Both Mr Jouahri and Mr Boussaid said no decision had been taken so far to apply for another facility once the precautionary and liquidity line ends.

The line provides financing for potential balance of payments imbalances in countries with sound policies and is intended as a backstop, according to the IMF website. The flexible credit line, by contrast, is designed for countries with very strong fundamentals and policy track records.

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Morocco is “permanently ready” to capitalise on improving public finances and currency liberalisation by returning to the international bond market, Mr Boussaid said, but had multiple financing options and would wait for the right opportunity to arise. He declined to give a possible timeframe or indicate how much the government might seek to raise.

“It’s possible this year, it’s possible to make it next year,” he said. “In any case, we will not be tapping the international markets to solely finance the treasury. It will also be an opportunity to tell a story showcasing what Morocco has achieved and to narrate a beautiful story of a country that is making progress.”

One of the fastest-growing economies in the Middle East, Morocco has made strides in stabilising its public debt and reducing its budget and current account deficits. Mr Boussaid said the government planned to cut the debt-to-GDP ratio to less than 60 per cent in 2021 from 64.7 per cent in 2017.

Among the measures it has taken to reduce public spending is phasing out subsidies. Fuel subsidies have been eliminated and Mr Boussaid said the programme would continue.

“We will most probably start by lifting subsidies on sugar, in a gradual and selective fashion. Sugar subsidy benefits rich and poor, but it is bad for health,” he said. Morocco consumes about 1.2 million tonnes of sugar a year.