The Central Bank of Morocco intends to complete the reform of the exchange rate system of its currency the dirham by preparing for the second phase, which requires disengaging the dirham from the euro and US dollar over the next five years, according to the strategic plan approved by the central bank at its last meeting in December 2023.
Morocco began liberalizing the exchange rate of its currency in 2018 by adopting a fluctuation range of 2.5% up and down instead of 0.3% previously. In 2020, this range was expanded to 5% while continuing to peg the dirham to a basket of currencies including 60% euro and 40% US dollar.
The central bank's strategic plan for 2024-2028 includes three main elements in addition to liberalizing the currency exchange rate: completing the central bank's digital currency project and a law allowing trading of encrypted assets.
According to Abdelatif Jouahri, Governor of Bank Al-Maghrib, "choosing the right timing to move to the second phase of dirham exchange rate reform is the biggest reform for us over the next five years, which will lead to disengaging from the euro and US dollar."
The goal the monetary authorities want to convey to markets is that "moving to a more flexible exchange rate system would help boost the competitiveness of the national economy," according to Yunis Ait Ahmedoush, professor of finance and macroeconomics at Abdelmalek Essaadi University in Morocco.
Over decades, the IMF has been urging Morocco to liberalize the dirham exchange rate but abandoned this in recent years after being convinced by authorities’ justifications for the need to prepare the economic and social environment to accommodate this step. This was according to Jouahri in a previous interview with AlSharq newspaper.
The article then discusses various economic factors and conditions that need to be met before the second phase of dirham liberalization such as inflation levels, fiscal balance, economic growth rates, and analysts' views on the potential impacts. It provides context on the central bank's reforms to date and plans going forward.
