IMF Executive Board Completes the Third Review of the Precautionary and Liquidity Line for Morocco

On January 27, 2016, the Executive Board of the International Monetary Fund (IMF) completed the third and last review of Morocco's economic performance under a program supported by a two-year Precautionary and Liquidity Line (PLL) arrangement, and reaffirmed Morocco's continued qualification to access PLL resources.

The current two-year PLL arrangement in an amount equivalent to SDR 3.2351 billion (about US$5 billion at the time of approval or 550 percent of Morocco's quota at the IMF) was approved by the IMF's Executive Board in July 2014. (SeePress Release No. 14/368). The arrangement supports the authorities' program to rebuild fiscal and external buffers and promote higher and more inclusive growth. It will expire in July 2016. Morocco's first 24-month PLL arrangement was approved on August 3, 2012, with an access equivalent to 700 percent of the quota, and expired in July 2014.

The PLL arrangement has provided insurance against external risks. The Moroccan authorities are treating the arrangement as precautionary, as they did with the 2012—14 PLL arrangement, and do not intend to draw under the arrangement unless Morocco experiences actual balance of payments needs from a significant deterioration of external conditions.

ThePLL, which was introduced in 2011, provides financing to meet actual or potential balance of payments needs of countries with sound policies, and is intended to serve as insurance or help resolve crises under wide-ranging situations.

Following the Executive Board discussion on Morocco, Mr. Mitsuhiro Furusawa, IMF Deputy Managing Director and Acting Chair of the Board, made the following statement:

“Morocco's overall economic performance has continued to improve in 2015. Strong policy implementation has helped reduce fiscal and external vulnerabilities and significant progress has been achieved on reforms. In an environment that remains vulnerable to important downside risks, continued efforts to move ahead with difficult but necessary reforms will be key for reducing the remaining vulnerabilities while promoting higher and more inclusive growth.

“Fiscal developments have been positive and consistent with the authorities' objective to reduce the deficit to 4.3percent of GDP in 2015. Substantial progress has been achieved on the subsidy reform, while support to the most vulnerable has expanded. Now that the draft legislation on the public sector pension reform has been approved by the government, its timely adoption by parliament and implementation will be key.

“Progress has also been made in upgrading the financial policy framework, including implementing recent Financial Sector Assessment Program recommendations, in addition to implementing Basel III norms and the new banking law. An important further step should be to finalize the new central bank law in order to enhance its independence and extend its supervisory and resolution powers. Preparations for a more flexible exchange rate regime, which will help preserve competitiveness and the economy's ability to absorb economic shocks, are progressing well.

“Morocco's external position has improved considerably, owing mainly to strong policies, rising exports in newly developed sectors, lower oil prices, and robust FDI, with reserves reaching a comfortable level. Structural reforms to improve the business climate and enhance competitiveness continue to be a priority in order to build on those gains. The implementation of the National Strategy for Employment will help address constraints in the labor market and reduce unemployment, especially among the youth.

“The arrangement under the Fund's Precautionary and Liquidity Line (PLL) remains on track. The PLL, which the authorities continue to treat as precautionary, has provided Morocco with insurance against external risks while supporting the authorities' economic strategy.”