February 20, 2020 / 5:44 PM / 3 months ago

Morocco ready for next step in dirham float process, says finance minister

RABAT, Feb 20 (Reuters) - Morocco is well-positioned to take the next step towards a more flexible exchange rate for the dirham, Finance Minister Mohamed Benchaaboun said on Thursday.

In January 2018, Morocco widened the band in which the dirham trades against hard currencies to 2.5% either side of a reference price from the previous 0.3%.

Two years on, with a stable dirham and positive macro-economic indicators, Morocco is ready to press ahead with its “sovereign and gradual approach” to dirham flexibility, Benchaaboun told a news conference.

“It is up to the finance ministry and the central bank to agree on when to move to the second step,” he said.

This would still be “the second step in a first phase” of the process of achieving a greater exchange rate flexibility, said Central Bank Governor Abdellatif Jouahri, ruling out any possibility for a sudden move to full dirham float.

The IMF supports Morocco’s “cautious and measured” approach in moving forward with dirham flexibility, said Managing Director Kristalina Georgieva, who was in Rabat to discuss preparations for IMF and World Bank Group meetings to be held in October 2021 in Marrakech.

She commended the reforms implemented by the country which she said was “leading the way in the region and the African continent.”

Morocco’s economic growth is projected to rise from 2.4% in 2019 to 3.7 % 2020 and 4% in 2021, according to the IMF.

In 2018, the IMF approved financing of about $2.97 billion in the form of a Precautionary and Liquidity Line (PLL) to help Morocco ward off potential external economic shocks.

Morocco has not drawn on the PLL arrangement and will continue to treat it as precautionary until it expires in December 2020, the finance minister said.

Morocco would also issue an international bond in 2020 when time is right, Benchaaboun said, without giving further details. (Reporting by Ahmed Eljechtimi; Editing by Christina Fincher)

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