COVID-19: IMF vows to remain closely engaged with Morocco

The International Monetary Fund has vowed to remain closely engaged with Morocco as the authorities address the impact of the coronavirus pandemic.

This came in a communiqué issued by the IMF confirming that the North African country drew the $3 billion available resources under the arrangement.

The authorities will use funds purchased under the PLL to cope with the social and economic impact of COVID-19, to maintain strong external buffers in a context of heightened uncertainties, and to maintain an adequate level of official reserves to mitigate pressures on the balance of payments, the communiqué, released Wednesday afternoon, said.

The PLL instrument is precautionary and designed to meet the liquidity needs of member countries with sound economic fundamentals but with some remaining vulnerabilities. It provides rapid access to Fund resources in the event of external shocks or a worsening global environment.

The international financial institution recalled that since 2012, Morocco has benefited from four successive PLL arrangements with the IMF.

This is the first time the authorities draw on funds available under the PLL, to cope with the unprecedented shock of the COVID-19 pandemic, including both its domestic impact and spillovers from a global recession, the IMF explained.

It noted that despite a range of measures taken by the authorities to increase health spending and support businesses and households, Morocco is likely to experience a recession in 2020 due to sizable declines in exports, tourism and remittances and a temporary freeze in economic activity.

While the current account deficit will widen and capital inflows should decline in 2020, Morocco is expected to maintain an adequate level of official reserves following the PLL purchase, the communique stated.

In a joint statement earlier Wednesday, the Moroccan Finance Ministry and the Central Bank, Bank Al Maghrib, said Morocco resorted to the PLL “as part of our country’s proactive response to the pandemic crisis of Covid 19.”

The amount is repayable over a 5-year period, with a 3-year grace period, said the joint statement.

The Covid19 pandemic, of an unprecedented scale, foretells a much deeper global economic recession than that of 2009. Moroccan economy will therefore be impacted, particularly in terms of global trade, travel receipts, remittances of Moroccan expatriates and FDIs, the statement said, adding that the PLL amount will help mitigate the impact of the health crisis on economy and is expected to help the country pay its imports besides sending a positive signal to foreign investors.