The IMF has unlocked $496 million in funding for Morocco, with total disbursements under its RSF program now reaching approximately $1.24 billion. The third review acknowledged Morocco’s economic resilience despite challenges, projecting modest growth ahead. Structural reforms and investments aim to transition Morocco to a green economy while addressing high unemployment and inflation.
On Tuesday, the International Monetary Fund (IMF) approved $496 million in funding for Morocco, following the completion of the third review under its Resilience and Sustainability Fund (RSF) program. This approval marks a total disbursement of around $1.24 billion, reflecting the Moroccan economy’s robustness amid negative shocks, as emphasized by Kenji Okamura, IMF deputy managing director.
The RSF arrangement was initiated in September 2023 to assist Morocco’s transition to a green economy while enhancing resilience to natural disasters. This funding comes in the wake of a devastating 6.8-magnitude earthquake that claimed nearly 3,000 lives, marking the deadliest quake in over 60 years for the nation. The approval coincided with the upcoming 2023 IMF and World Bank Annual Meetings, scheduled to be held in Marrakech.
Despite facing another challenging year of drought, the IMF noted that Morocco’s economic growth is anticipated to slow only modestly to 3.2% in 2024. Projections indicate a potential GDP increase to approximately 3.7% over subsequent years, aided by structural reforms and new infrastructure initiatives. Mr. Okamura stated these reforms are vital for fostering more resilient, job-rich, and inclusive growth.
However, issues remain, such as high unemployment rates hovering at about 13%, largely attributed to setbacks in agriculture. While inflation has decreased, allowing for recent interest rate cuts, the central bank of Morocco has lowered rates again to 2.25% from 2.5%, expecting inflation to dip further to around 2% over the next two years.
An IMF mission in Rabat highlighted the necessity for structural reforms aimed at bolstering job growth and acknowledged the benefits of strong domestic demand in promoting economic expansion. Improvements to the tax system and preparations for incorporating climate risk assessments into fiscal planning were also recognized. Additionally, the Mohammed VI Investment Fund has made strides in facilitating equity financing for small and medium-sized enterprises.
The third review of the RSF program indicated that six out of seven proposed measures were implemented successfully. Mr. Okamura noted that these measures would optimize water resource management, liberalize the electricity sector, and address climate-related fiscal risks. Gradual implementation of a carbon tax has been postponed, pending further impact analyses by Moroccan authorities.
In conclusion, the IMF’s recent disbursement of $496 million underscores the commitment to supporting Morocco’s economy amidst challenges like natural disasters and drought. Structural reforms are pivotal for sustainable growth and job creation, although concerns about unemployment and inflation remain. Continued investment in the green economy and infrastructure, along with a cautious approach to fiscal reforms, will be essential for Morocco’s resilience and prosperity going forward.
Original Source: www.thenationalnews.com
