Morocco Seeks IMF Support as Foreign Exchange Reserves Dwindle

The rating agency explained that Morocco’s foreign exchange reserves continue to decline, falling below five months of import coverage for the first time since 2013. According to forecasts, the country’s current account balance will remain under pressure, posting deficits of 5.4% of GDP in 2022 and 5.7% in 2023, the highest level of deterioration since 2014.

To establish its diagnosis, Fitch announced a drop in phosphate prices as well as a recession in the euro zone in 2023. These factors will weigh on exports and remittances from Moroccans living abroad (MRE), it said. Despite some resilience in automotive demand in the euro zone, the study expects a recession to weigh on other major export sectors, such as textiles and electronics.

Faced with this situation, Morocco will have to seek the support of the IMF, the agency indicates. "We believe this will push Morocco to seek IMF support to strengthen its foreign exchange reserves. The authorities could seek to use the IMF’s Special Drawing Rights (SDRs) or a Precautionary and Liquidity Line (PLL), similar to the program that was used in April 2020," it said.