COVID-19 Sparks Record Cash Withdrawals in Morocco, Over 12 Billion Dirhams in April

According to the latest monetary statistics from BAM, the outstanding amount of currency in circulation increased from March to April from 266.6 billion dirhams to 278.48 billion dirhams, meaning that more than 12 billion dirhams were withdrawn from the banking system during the month of April. An unprecedented record recorded during this period of health crisis related to the coronavirus. The rush to banks could also be observed during the summer period and Eid al-Adha.

This is not a flattering situation for the banks. Moreover, the increase in currency circulation further widens the liquidity deficit of the system. This widening of the liquidity deficit of the banking system should continue in 2020 at a more accentuated pace, due to a continued upward trend in currency circulation, which will be amplified by the panic generated by the Covid-19 pandemic, according to CDG Capital.

With the decline in financial flows from Morocco’s trade partners, particularly tourism flows and remittances from Moroccans living abroad, the kingdom’s foreign exchange reserves will experience a downward trend, warns CDG Capital in its annual note entitled "National Economy and Interest Rate Market Facing the Challenges of Covid-19 and Drought", published last April.

"Faced with this situation, the central bank should continue to use the standard instruments to supply the market with cash, in particular the 7-day advances on call for tenders. However, in the face of an accentuation of the deficit and in order to meet the structural cash needs of the banks, the central bank’s recourse to long-term instruments will be more important, mainly long-term repurchase agreements, guaranteed loans and foreign exchange swaps," analyzes the subsidiary of the Caisse de Dépôt et de Gestion.