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Morocco Heading For an Economic Turnaround Amidst Loan Repayment to IMF

Morocco has taken a pledge to repay a part of the credit facility of $3 billion by the International Monetary Fund, under the pretext that the economy may have seen off the worst effects due to an ongoing pandemic and an acute drought. 

The IMF stated that post-program monitoring will not be necessary for Morocco as it would soon repurchase a part of the credit line it drew in April. The repurchase would be $936 million and will take effect on January 8, just before their grace period ended almost after 30 months. This would allow an easing of future sovereign financial obligations. The finance ministry also aims to instill a sense of confidence in its investors by this move.

The current level of foreign currency is projected to remain unchanged, equal to seven months of imports needed through the medium term. This would result in a potential turnaround for Morocco. Tourism and export which brings in substantial amounts of foreign exchange have taken a hit this year. This led the government to raise massive amounts of domestic and foreign debt, including a $3 billion Eurobond. 

The IMF forecasts that the country’s gross domestic product is expected to rebound with 4.5% growth in 2021 after it contracted by 7.2% in 2020. The external debt is projected to remain around 39% over five years from 2020 whereas it was 32.8% in 2019. Despite it all, IMF warns of exceptional uncertainty and that the economy would need constant support until it recovers. 

Mark Bohlund, a Senior Credit Analyst at REDD Intelligence stated that it would be likely for Morocco to see a recovery driven by vehicle-manufacturing phosphates and the financial industry before tourism and agriculture come back to working efficiently.