Morocco’s Central Bank Governor Rejects IMF Push for Flexible Dirham Exchange Rate

Abdellatif Jouahri believes that it is not appropriate to carry out a new widening of the dirham’s fluctuation band, despite the insistence of the IMF. "We have defended our point of view and told them that it was up to us to decide on the right timing. We don’t feel ready, although technically everything is in place," he said at a press conference held on Tuesday following the last meeting of the year of BAM’s board of directors.

To read: Morocco Widens Currency Trading Band, Advancing Dirham Flexibility Reform

According to the central bank governor, the acceleration of the reform recommended by the IMF in the current context marked by the health crisis, leaves uncertainties and risks weighing on the state budget. "If we move to the second stage, it will not be an expansion of the band that we will operate, but we will start to abandon the basket of currencies anchor and move towards inflation targeting. The new anchor will be the key rate and monetary policy," he explains, stressing that "the consequences would be more damaging if we were to commit and then go back."

To read: Morocco Advances Toward More Flexible Dirham Exchange Rate

Abdellatif Jouahri also raises the fact that economic operators active in import-export, particularly SMEs, are not willing to implement this reform. "We have done a regional tour to raise awareness among SMEs, but we feel the need for a training policy for operators, so that they are better armed," he notes.

The first widening of the dirham’s fluctuation band took place in September 2018, allowing the national currency to move from ±0.3% to ±2.5%. A second widening was recorded in March 2020, with a fluctuation of ±5%. Since the beginning of the reform, the national currency has remained relatively stable against the euro and the dollar, despite the concerns raised before the launch of the reform.