18 January 2018

Morocco: Exchange Rate Regime Reform Is a "Sovereign Decision", Says Governor of Morocco's Central Bank

Rabat — The reform of the exchange rate regime, which is a "sovereign" decision made by Moroccan authorities, was developed in coordination with the Ministry of Economy and Finance and Bank Al-Maghrib (Morocco's central bank), Governor of Bank Al Maghrib, Abdellatif Jouahri, said here on Wednesday.

Speaking at a joint meeting of the Committee on Finance, Planning and Economic Development of the House of Advisors (upper house) and the Finance and Social Development Committee of the House of Representatives (lower house), Jouahri stressed that the reform of the exchange rate regime was not "imposed by an international financial institution and was not made under the pressure of a currency crisis, as is the case in several countries".

In this regard, he pointed out that the International Monetary Fund (IMF) has constantly raised the question of the reform of the exchange rate system at the annual consultations under Article 4 (since 1998), recalling that the World Bank has also mentioned the reform of the exchange rate system since the mid-1990s, and also in its report on the Moroccan economy of 2006.

Jouahri said that Bank Al Maghrib took the necessary time to conduct the necessary studies and analyses, learn about experiences in this area and evaluate the impact of this reform on the economy and the purchasing power of the citizens, in coordination with the Ministry of Economy and Finance, adding that all stakeholders have been involved in a transparent way to ensure the success of this reform.

Governor of Bank Al-Maghrib made it clear that there will be no devaluation of the dirham, stressing that this new regime is not related to the floating of the dirham.

Regarding the impact of the reform on the economy and the purchasing power of citizens, Jouahri noted that the scenarios developed by the Central Bank and the Ministry of Economy and Finance indicate, on the basis of available data and of a possible devaluation of the dirham of 2.5%, that the impact of the reform on growth in 2018 will be positive and will reach + 0.2%.

With regard to inflation, Jouahri said that in the extreme case we should expect an additional inflation of 0.4% to reach a rate of 2% in 2018 (or even 1.9%) according to the scenario of the Central Bank. He gave the example of the price of hydrocarbons, including diesel, which will record an increase of 0.15 dirhams per litre, from 9.6 dirhams/litre to 9.75 dirhams/litre.

Since the implementation of this reform on Monday, the exchange rate of the dirham on the foreign exchange market has remained between -0.3% and + 0.3%, although the volatility has been widened to + 2.5%, he noted, adding that the exchange rate of the dirham against foreign currencies remained at the same level as before the reform.

The move to a flexible exchange rate regime will strengthen Morocco's economy and support the structural policies carried out by the government, he affirmed, adding that this reform will strengthen the ability of the Moroccan economy to cope with international monetary crises.


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