Moroccan central bank urges accelerated reforms to sustain growth

Morocco must intensify structural reforms and rethink its economic strategy to maintain resilience in the face of mounting climate risks,fiscal pressures,and social demands,according to the 2024 annual report from Bank Al-Maghrib.

The report,presented to King Mohammed VI by the Bank’s Governor Abdellatif Jouahri,was released on the occasion of Throne Day.

It outlines a roadmap for Morocco’s economic future,emphasizing the need to: reinforce resilience to external shocks,enhance agility in navigating uncertainty,and preserve macroeconomic stability as a foundation for long-term growth.

The central bank warns that the sustainability of direct financial aid,which will exceed 24 billion dirhams in 2024,is at risk without regular eligibility reviews and a stronger focus on integrating beneficiaries into the labor market.

Meanwhile,the long-delayed pension reform remains unresolved. Jouahri stressed that only a broader tax base or expanded economic activity can secure the future of public finances. Recent public sector wage hikes,he noted,could have been used to revive stalled negotiations with social partners.

Bank Al-Maghrib also calls for a revision of the organic finance law and the introduction of a fiscal rule to restore budget predictability,as repeated supplementary credit allocations since 2020 have strained fiscal discipline.

While Morocco continues to attract foreign direct investment (FDI),the report highlights a troubling trend: for the second year in a row,dividend repatriation has outpaced new inflows,resulting in a negative FDI currency balance.

To address this,the central bank urges greater private sector involvement and stronger mobilization of domestic capital,particularly through the Mohammed VI Investment Fund,to ensure FDI translates into job creation and economic growth.

The report identifies the fragmentation of Morocco’s productive sector,dominated by very small enterprises,as a major structural weakness. The bank recommends a comprehensive strategy involving: education and skills development,entrepreneurship promotion,support for VSEs,and stronger enforcement against corruption and unfair competition.

Bank Al-Maghrib notes progress in exchange rate reform and the development of new financial instruments,including an interbank forward market for currency and interest rate swaps. However,legal and tax reforms are needed to fully implement these tools.

On inflation,the bank believes the current dirham fluctuation band offers sufficient flexibility to consider a more explicit inflation-targeting framework in the future.

Following Morocco’s removal from the FATF and EU grey lists in 2023,the country is preparing for its next mutual evaluation in 2026. The central bank views this as critical to maintaining the credibility and resilience of the national financial system.