Morocco will decide how and when it will shift to a flexible exchange-rate system when an International Monetary Fund delegation visits the North African kingdom next month, central bank Governor Abdellatif Jouahri said.
Authorities will discuss the time-frame and the required steps with IMF officials, he said. Bank Al-Maghrib is “considering widening the bands for fluctuation of the dirham, then observing how the market deals with this change, a process that typically takes a few years,” Jouahri said in an interview in Washington, where he attended IMF and World Bank meetings. Afterwards, it may “allow market forces to determine the value of the dirham with limited intervention before letting it go completely,” he said.
Morocco has avoided much of the turmoil that has spread in parts of the region since 2011, helping the economy outperform neighbors in North Africa. The exchange-rate shift, as well as plans to remove capital controls, are part of efforts to turn Morocco into a regional financial hub and attract more investments, Jouahri said last year.
The governor said the process would involve helping export industries adjust their reporting and budget practices. Morocco is drawing on the IMF’s expertise throughout the process, he said. The country is also “seriously considering” renewing a $5 billion IMF credit line that expires in June, though it doesn’t plan to use it, Finance Minister Mohamed Boussaid said in a separate interview in Washington.
The credit line is “like an umbrella for rainy days,” he said.
Economic growth is set to slow to 1 percent this year after expanding 4.2 percent in 2015, largely because of low rainfall. Policy makers cut the benchmark interest rate by 25 basis points in March and stand ready to reduce borrowing costs again “if there is a need to push growth further,” Jouahri said.