Morocco’s Plan to Repay IMF Hints at Economic Turnaround

Morocco pledged to soon repay part of a $3 billion International Monetary Fund credit facility, suggesting the kingdom’s economy may have seen off the worst effects of the pandemic and an acute drought.

Post-program monitoring may not be necessary for the North African nation after it said it would “soon” repurchase an unspecified part of the credit line it drew on in April, the IMF said Wednesday in a statement following its latest Article IV consultation.

The repurchase will be for $936 million and takes effect Jan. 8, almost 30 months before the end of a three-year grace period, the finance ministry said in a statement. The move allows “an easing in future sovereign financial obligations” and should “boost investors’ confidence” in the economy, the ministry said.

Foreign currency holdings are projected to remain at their current level equivalent of seven months of import needs through the medium term, according to the ministry statement.

It points to a potential turnaround for Morocco, where major foreign-currency earners such as tourism and exports, including to key market Europe, have taken a hit this year. The situation prompted authorities to raise record amounts of domestic and foreign debt, including a $3 billion Eurobond.

The IMF said a steady flow of remittances sent by Moroccan expatriates and lower imports helped maintain official reserves at “an adequate level.” It forecast the country’s gross domestic product will rebound with 4.5% growth next year after a projected 7.2% contraction in 2020.

External debt as part of GDP is projected to remain around 39% over 2020-2025, versus 32.8% in 2019, the IMF said.

But the Washington-based lender also warned that “exceptional uncertainty” surrounds its outlook and authorities would need to continue supporting the economy until recovery is “well-entrenched,” and then resume fiscal consolidation.

Foreign-currency holdings were at $30.5 billion before Morocco’s record Eurobond sale this month, “so repaying the IMF won’t be a problem,” Mark Bohlund, a senior credit analyst at REDD Intelligence, said after the announcement.

Morocco may see its recovery initially driven by vehicle-manufacturing, phosphates and the financial industry before more labor-intensive industries like tourism and agriculture pick up, he said.

©2020 Bloomberg L.P.

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