and liquidity line
25/07/2016 06:12 AST
Moroccan authorities have stated that they intend to treat the arrangement as precautionary
The new PLL provides Morocco with useful insurance against external shocks as authorities pursue reform agenda aimed at higher and more inclusive growth which are elevated.
The Executive Board of the International Monetary Fund (IMF) approved a two-year arrangement for Morocco under the Precautionary and Liquidity Line (PLL) for SDR 2.504 billion (about $3.47 billion, or 280 per cent of Morocco's quota). The access under the arrangement in the first year will be equivalent to SDR 1.252 billion (about $1.73 billion, or 140 per cent of quota).
In recent years, the authorities have successfully reduced fiscal and external vulnerabilities and implemented key reforms with the support of two successive 24-month PLL arrangements. The new PLL arrangement will provide Morocco with useful insurance against external shocks as the authorities pursue their reform agenda aimed at further strengthening the economy's resilience and fostering higher and more inclusive economic growth.
The authorities have stated that they intend to treat the arrangement as precautionary, as they have done under the previous two arrangements, and they do not intend to draw under the PLL unless Morocco experiences actual balance of payments needs from a significant deterioration of external conditions.
Morocco's first PLL arrangement for SDR 4,117.4 million (about $6.21 billion at the time of approval) was approved on 3 August 2012. Morocco's second 24-month PLL arrangement for SDR 3.2351 billion (about $5 billion at the time of approval) was approved on 28 July 2014.
The PLL was introduced in 2011 to meet more flexibly the liquidity needs of member countries with sound economic fundamentals and strong records of policy implementation but with some remaining vulnerabilities.
“Despite the difficult global and regional environments, Morocco has made significant strides in reducing fiscal and external vulnerabilities and addressing medium-term challenges,” Mitsuhiro Furusawa, IMF Deputy Managing Director and Acting Chair of the Board.
Furusawa noted that external imbalances have declined substantially and fiscal consolidation has progressed, while policy and institutional frameworks have been strengthened, including through the implementation of the new Organic Budget Law, the adoption of the civil service pension reform, and ongoing improvements to financial sector oversight.
“Nevertheless, the economy faces significant downside risks. In particular, heightened geopolitical and security risks, a protracted period of slower growth in Morocco's main trading partners, or more volatile global financial conditions could significantly affect the economy through higher oil prices, disruptions to export and tourism revenues and remittance and capital inflows, or higher borrowing costs. In this context, a successor PLL arrangement would serve as a valuable insurance against external risks and support the authorities' economic policies,” he said.
He added that further fiscal consolidation should be based on both continued expenditure control and further tax reforms.
“Continued reforms to improve the business climate, competitiveness, and labour market policies will be essential to increase potential growth, reduce persistently high unemployment levels, especially among the youth, and increase the participation of women in the labour force,” he said.
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