IMF chief says ready to renegotiate Morocco line of credit

IMF is keen to renegotiate a $6.2 bln line of credit

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International Monetary Fund chief Christine Lagarde said on Friday that the fund was ready to renegotiate a $6.2 billion precautionary line of credit for Morocco if its government believed it was needed.

The Moroccan finance minister said the North African kingdom was interested in having the insurance of the precautionary line again in case economic conditions deteriorate. The current line of credit, approved by the IMF in August 2012, expires this August.

“We are satisfied about how Morocco managed the two years of the precautionary credit line. Morocco used it only as insurance. We are at the disposal of the Moroccan authorities if they think it is useful,” Lagarde told reporters.

“It is to Morocco to decide. We remain open and favorable to renegotiate it,” she added.

The IMF credit line provided reassurance to Morocco’s foreign lenders, investors and rating agencies, allowing it to tap international capital markets at favorable borrowing terms.

Morocco’s Finance Minister Mohamed Boussaid, speaking with IMF’s Lagarde, said he was glad the country did not have to make use of the money.

The IMF expects Morocco to push ahead with structural reforms of its subsidies and pension and taxation systems.

Morocco is the first country in the region to start cutting its subsidies. It has ended subsidies on gasoline and fuel oil and has begun significantly lowering its diesel subsidies as well.

“It is a great and successful start in our reform plans. Inflation remains under control,” Boussaid said.

“The urgent one now is the pension system as every day of delay costs us a lot of money,” Boussaid told reporters.

The Moroccan government is facing anger and resistance from the country’s biggest trade unions over pension reform.

The government’s plans to reform public sector pension funds put reform costs at more than 5 billion dirhams ($613.42 million) during an initial phase, and workers would also have to contribute more.

Morocco has agreed to receive $4 billion in loans from the World Bank from 2014 to 2017 for government energy, infrastructure and other projects.

But it still sees its external borrowing needs this year at 2.5 billion euros to plug the deficit estimated at 4.9 pct of the gross domestic product (GDP).

Boussaid told Reuters on Friday that the government is still planning a euro-denominated bond issue this year. He declined to say how much it would be raise, but last year he had said it could be as much as 1 billion euros.

($1 = 8.1510 Moroccan Dirhams)

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