In its latest economic analysis report, entitled “Exchange Rate Liberalization Reaffirms Long-Term Commitment to Reform,” BMI a Fitch Group firm that provides macroeconomic, industry and financial market analysis, says that Morocco’s new reform is “unlikely to prompt a sharp currency sell-off, limiting near-term risks to growth and inflation.”

According to the research firm, Morocco’s decision to gradually move towards a more flexible exchange rate regime “will offer crucial economic tailwinds in the years ahead.”

On January 15, the Ministry of Finance officially widened the band in which the Moroccan dirham trades against a basket of currencies, 60 percent for the euro and 40 percent for the dollar, from ±0.3 percent to ±2.5 percent.

Over a 10 to 15 years time frame, the ministry explained that it will move towards a free floating currency. For BMI, this move is “likely to help the country in its efforts to attract greater investment to the kingdom and diversify trade, while the risks of disorderly depreciation are well contained given the country’s robust financial buffers.

The firm maintains its view “that the risks of disorderly depreciation are limited.” This view was supported by Bank Al Maghrib’s recovery in foreign currency reserves, after the delay of the first phase of the reform initially scheduled for July 2017 resulted in a sharp rush on currency fueled by market speculation against the dirham.

This time around, BMI believes “that investor uncertainty has been contained, with reserves having expanded by 20.6 percent since June 2017.”

SOURCE:moroccoworldnews

 

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