The International Monetary Fund is issuing some financial advice to Morocco — the international arbiter of finance suggests the state should move toward a flexible exchange rate, which officials say would help the country deal with volatility and compete in a fast-paced global economy.
“The mission fully supports the authorities’ intention to progressively ease into the exchange rate regime, which should make the economy better able to absorb external shocks and preserve its competitiveness,” IMF President Nicholas Blancher said in a press release. “The current situation continues to provide a window of opportunity to begin this transition in a gradual and orderly manner. It would be appropriate to initiate this process as soon as possible.”
However, others are pushing back against trying to externally expedite the move, saying that Morocco deserves to make its own sovereign decisions.
Dealing with unemployment, some experts say, will spur economic growth to up around 6 percent. Others suggest Morocco should look for foreign financing, perhaps from lenders offering unprecedented amounts of money worldwide, such as Saudi Arabia.
Areiel Wolanow at Finserv says there seems to be a willingness in Morocco to work with the philosophy of a flexible exchange rate.
“While carefully protecting its sovereignty, the Moroccan government indeed seems poised to work with the IMF towards gradually and carefully moving towards having the dirham float on the market,” Wolanow told Maghreb News Wire on Nov. 9. “While obviously a more freely floating dirham will make it easier for Morocco to successfully attract foreign investment, there is also a valid concern that widening the band in which the dirham is allowed to float will negatively impact consumers – all the more so, since Morocco has been slowly reducing the extent to which it subsidizes basic commodities.”
However, he said, IMF is less concerned about volatility.
“The IMF seems to feel that the risk of volatility is low, given Morocco’s modest growth and ample foreign reserves, but of course the IMF does not speak for those who would be at risk in the event of such volatility,” Wolanow said.
If the move is done properly, he said, it will have some positive outcomes, but careful handling is important. Wolanow also stressed the importance of new financial technologies such as cryptocurrencies that are remaking markets and changing how world economies handle money.
