The IMF repayment plan suggests a possible turnaround for Morocco, where tourism and exports have taken a hit this year.
Morocco has pledged to repay part of a $ 3 billion credit facility from the International Monetary Fund soon, suggesting that the kingdom’s economy may have suffered the worst effects of the pandemic and a severe drought.
Post-program follow-up might not be necessary for the North African nation after announcing that it would “soon” redeem an unspecified portion of the line of credit it used in April, the IMF said on Wednesday in a report. communicated at the end of its last consultation under Article IV.
The buyback will be for $ 936 million and will take effect Jan. 8, nearly 30 months before the end of a three-year grace period, the finance ministry said in a statement. The move allows “an easing of future sovereign financial obligations” and should “strengthen investor confidence” in the economy, the ministry said.
Foreign currency assets are expected to remain at their current level equivalent to seven months of medium-term import needs, according to the ministry statement.
This indicates a potential turnaround for Morocco, where major sources of foreign exchange such as tourism and exports, including to Europe’s key market, have been hit this year. The situation prompted the authorities to raise record amounts of domestic and foreign debt, including a $ 3 billion Eurobond.
The IMF said a constant flow of remittances sent by Moroccan expatriates and a drop in imports have helped to keep official reserves “at an adequate level”. He predicts that the country’s gross domestic product will rebound with 4.5% growth next year after an expected 7.2% contraction in 2020.
External debt to GDP is expected to remain around 39% over 2020-2025, up from 32.8% in 2019, the IMF said.
But the Washington-based lender also warned that “exceptional uncertainty” surrounds its outlook and that authorities should continue to support the economy until the recovery is “firmly entrenched” and then resume fiscal consolidation.
Foreign currency holdings stood at $ 30.5 billion ahead of Morocco’s record Eurobond sale this month, “so paying back the IMF won’t be a problem,” analyst Mark Bohlund said. Senior Credit Officer at REDD Intelligence, following the announcement.
Morocco could see its recovery initially driven by vehicle manufacturing, phosphates and the financial industry before more labor-intensive industries like tourism and agriculture pick up, he said. declared.