Morocco’s Foreign Exchange Reserves Stand at 201.5 Bln Dirhams by July 2017

Morocco’s foreign exchange reserves stood at 201.5 billion Dirhams by July 2017, shrinking 16.4% compared to the same period last year, the Central Bank, Bank Al Maghrib said.

The Bank said it maintains key interest rate at 2.33%, adding that the exchanges volume rose from 5.4 billion to 8.2 billion DH.

The drop in Morocco’s Foreign Exchange reserves augurs ill for the country’s finances as it braces for the launch of a gradual float of the Dirham.

The Bank has previously ensured that measures will be gradually taken to ensure a more flexible exchange rate of the Dirham amid promising macro-economic conditions marked by low oil prices and increasing demand on phosphates.

The floating of the pegged Dirham was encouraged by the IMF, which sees in a more flexible exchange regime a move to strengthen the competitiveness of the Moroccan economy and its resilience against external shocks.

A flexible exchange regime will enable the Central Bank to lead a more independent monetary policy through a progressive approach. The peg on the Dollar and Euro would be eased to allow the currency to trade within a narrow range with the trading band gradually widening with a view to fully removing the peg in a few years.

Morocco has undertaken reforms to strengthen public finances by maintaining inflation under control and ending subsidies for fuel as well as curbing public sector employment, these measures reduced significantly the country’s resort to foreign debt, of which 75% is in Euro.

A stable tourism market, a promising agricultural output following abundant rainfall and a subsidy reform helped boost Morocco’s foreign exchange reserves, which now cover 7.6 months of imports, compared, according to the World Bank, to 6.4 months of imports by the end of 2016.