The International Monetary Fund (IMF) has advised Morocco to establish a clear inflation target for its central bank, Bank Al Maghrib, amidst a backdrop of easing inflationary pressures.
Morocco saw a reduction in annual inflation to 6.1% in 2023 from 6.6% in 2022, with further moderation expected to 2.4% in the current year. This decline is attributed to lower prices of imported goods and improved stability in food markets.
The IMF recommends that Bank Al Maghrib resume its transition towards an inflation-targeting framework, supported by its decision to maintain the benchmark interest rate at 3%. Additionally, the IMF suggests fiscal reforms to enhance tax revenue and expand social welfare programs for medium-term fiscal consolidation.
To tackle rising unemployment, which reached 13% in 2023, the IMF advises reforms such as restructuring state-owned enterprises and promoting private sector investment. Furthermore, the IMF stresses the importance of infrastructure improvement to address water scarcity issues exacerbated by drought conditions.
Morocco’s progress in liberalizing the electricity market is lauded, with the IMF anticipating a smooth transition to renewable energy sources.
Looking ahead, the IMF forecasts gradual economic growth for Morocco, driven by domestic demand, increased exports, and heightened investment activity.
The IMF’s recommendations aim to support sustainable growth and stability in Morocco’s economy amidst evolving challenges and opportunities.
photo source: Google
By: Montel Kamau
Serrari Financial Analyst
22nd February, 2024
