Morocco – Keeping the course when the seas are rough

Throughout the past decade, Morocco has faced several external challenges, including weak growth in key trading partners, large swings in international oil prices, and regional geopolitical tensions. Despite rough waters, the government stayed the course and remained focused not only on immediate stability, but also on the long-term needs of the Moroccan economy.

During this turbulent time, a set of key priorities guided the country’s path towards increased economic resilience. Energy subsidies, for example, which reached about six percent of GDP in 2012, were a threat to public finances. Their elimination allowed Morocco to strengthen social programs targeting vulnerable population groups. By investing in education, health, and other public services, and by expanding social safety nets, the percentage of the population living below the national poverty line fell from about 15 percent in 2000 to below five percent today. In fact, extreme poverty was eradicated. In addition, a new legal framework helped strengthen oversight of public finances and limit the risk of excessive public debt and plans for a fairer tax system were recently agreed upon in a national tax conference.

The government also enacted important reforms to achieve longer-term economic goals such as raising growth, diversifying the economy, and integrating it globally. In the monetary and financial sector, Morocco’s central bank secured financial stability and supported the expansion of Moroccan banks on the African continent, where they have become large players. A new financial inclusion strategy was adopted in early 2019 to facilitate greater access to financial services by Moroccan individuals and firms. Foreign investment has contributed to the development of new industries, including automobile and high-tech sectors that now represent the bulk of Morocco’s exports. In January 2018, the government initiated a transition toward greater flexibility of the dirham to help immunize the economy from the impact of external shocks and preserve its competitiveness.

Still, the road to higher and more inclusive growth remains long. Further efforts are needed to reduce social and regional inequalities and unemployment. For instance, nearly one-quarter of rural households have no direct access to a road and live at least 10 kilometers from basic health services. Morocco’s youth and middle class need access to better-quality education and jobs, and women need equal opportunities. Addressing these critical issues will require a wide-ranging response, including the promotion of a more efficient and decentralized public sector, quality public services, and support for entrepreneurship and a vibrant small and medium enterprise sector, which will be the engine for future job creation.

Fortunately, Morocco is relatively well positioned to address these challenges by turning to a new generation of reforms. Indeed, debate about a new growth model is well underway in Morocco, and the authorities are pursuing an inclusive approach to reforms, as illustrated by the recent national tax conference. Key priorities include improved education; continued fight against corruption; a greater focus on developing new technologies, including to raise public transparency; a revamped tax system; the modernization of the civil service and labor market; and continued improvements to the business environment. These reforms will help strengthen Morocco’s economy and its role as a leading international partner in the region and on the African continent.

Throughout this journey, the IMF has been a close partner, supporting the government’s commitment to sound policies and reforms and its long-term vision. Countries often approach the IMF in times of crisis, but in the case of Morocco, it was to avert hardship. The IMF has stood side by side with the authorities as they worked to enhance economic resilience, growth, and integration into the world economy. We have also put the experience from other countries at the service of Morocco, providing advice on public finance, exchange rate, and financial sector reforms, as well as insurance against external shocks that could hit the economy. That said, the Moroccan authorities’ strong ownership of their reform program has been a key pillar of this partnership.

This experience offers valuable lessons for other countries in the region. Just as in Morocco, the IMF stands ready to help its members not only in crisis, but as they navigate their path to higher and more inclusive growth.

Nicolas Blancher is the IMF’s Mission Chief for Morocco.

Last Update: Wednesday, 20 May 2020 KSA 09:55 - GMT 06:55
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