The Executive Board of the International Monetary Fund (IMF) has completed the second review of Morocco's performance under an economic program supported by a two-year Precautionary Liquidity Line (PLL) arrangement and reaffirmed Morocco's continued qualification to access PLL resources.
The PLL arrangement was approved on August 3, 2012 in an amount equivalent to SDR 4,117.4 million (about US$ 6.2 billion, 700 percent of quota).
The access under the arrangement in the first year is equivalent to SDR 2,352.8 million (about US$3.6 billion, or 400 percent of quota), rising in the second year to the equivalent of SDR 4,117.4 million (about US$ 6.2 billion) cumulatively.
The Executive Board concluded the first review on February 1, 2013.
The PLL arrangement will continue to support the authorities' home-grown reform agenda aimed at achieving higher and more inclusive economic growth by providing a useful insurance against external shocks. The PLL was introduced to meet more flexibly the liquidity needs of member countries with sound economic fundamentals and strong record of policy implementation but with some remaining vulnerabilities.
The IMF's Executive Board welcomed the authorities' intention to continue treating the arrangement as precautionary.
Following the Board's discussion, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, issued the following statement:
"The arrangement under the Fund's Precautionary and Liquidity Line (PLL), which the authorities intend to continue to treat as precautionary, has provided Morocco with an insurance against external risks while supporting the authorities' economic strategy.
"Following the deterioration in the fiscal and external accounts in 2012, the authorities have taken significant measures to reduce vulnerabilities, despite an unfavorable external environment and a challenging regional context. Continuing efforts to build consensus and move ahead with difficult but necessary reforms will be key for preserving macroeconomic stability while promoting higher and more inclusive growth.
"The authorities' fiscal deficit target for 2013 of 5.5 percent of GDP remains consistent with their medium-term objective built on maintaining fiscal sustainability and supporting external adjustment. Close monitoring and firm control of spending will be needed through the rest of the year to ensure that this target is met. The planned tax reform should promote more equity and support competitiveness while generating adequate resources. Continued efforts to contain the wage and subsidy bills are important for creating space for better targeted social spending and higher capital expenditure. Recent actions to reduce subsidies are welcome in that regard, while moving ahead with a comprehensive subsidy reform will be crucial to further reducing fiscal and external vulnerabilities.
Furthermore, the early adoption of a new organic budget law will be important to ensure a strong, transparent and modern fiscal framework.
"Lower global commodity prices, rising exports in newly developed sectors and lower food imports have helped reduce the current account deficit, and, combined with strong capital inflows, stabilize reserves. Structural reforms to enhance competitiveness continue to be a priority to sustain these gains. Moving toward greater exchange rate flexibility supported by appropriate macroeconomic and structural policies would enhance external competitiveness and the economy's ability to absorb shocks."