Morocco’s central bank keeps benchmark interest rate at 1.5% By Reuters

From Ahmed Al-Jashtimi

RABAT (Reuters) – Morocco’s central bank kept the benchmark interest rate at 1.5 percent on Wednesday, saying monetary policy was too accommodative as the economy recovered from the repercussions of the COVID-19 pandemic.

The bank said in a statement after its quarterly meeting that inflation is expected to reach 1.2 percent this year and 1.6 percent next year, compared to 0.7 percent in 2020, despite the impact of inflationary pressures on imports.

The bank revised its growth forecast this year to 6.2 percent from its initial forecast of 5.8 percent, citing a recovery in agricultural production and progress in the country’s COVID-19 vaccination campaign. Morocco leads the African countries in distributing doses, while vaccinating more than 50 percent of its population, and has launched a third dose program.

Assuming an average grain harvest, the bank said, Morocco’s economy would grow 3 percent next year.

He added that tourism revenues, a major factor in hard currency inflows to Morocco, are expected to jump to 60.7 billion dirhams (6.7 billion) from 33.3 billion dirhams this year. This compares with 78.7 billion dirhams in 2019.

Remittances from Moroccans abroad are expected to rise to 87 billion dirhams in 2021 and 82.7 billion dirhams in 2022.

The influx of hard currency through remittances created a surplus in foreign currency, which prompted the bank to purchase $880 million from banks to ensure a good performance of the local foreign exchange market, Central Bank Governor Abdel Latif El-Gawahri told reporters after the meeting.

But imports are still higher than exports despite an increase in sales of phosphates and cars.

The bank said the current account deficit would rise to 2.5 percent of gross domestic product this year, from 1.5 percent last year.

He added that the country’s foreign exchange reserves will amount to 345.1 billion dirhams ($38 billion), which covers seven months of imports, referring to external financing to the Treasury and the allocation of $10.8 billion in special drawing rights to the International Monetary Fund.

The central bank also said the budget deficit would decline from 7.6 percent in 2020 to 7.3 percent in 2021 and 6.8 percent in 2022.

He added that the government debt will rise to 77.3 percent in 2021 and to 79.5 percent in 2022. The bank said the percentage of bad loans increased to 8.7 percent in August.

The central bank had asked banks not to distribute dividends for 2020, but Al-Jawahiri said the bank would wait until the end of the year to allow dividends to well-performing banks “on a case-by-case basis.”

(Press coverage by Ahmed Al-Jashtimi – Prepared by Wajdi Al-Alfi for the Arab Newsletter)

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