Growth will be revised to 2 or 2.5% depending on the March rains (BAM)

For the Wali of BAM, with the current shock, a new precautionary and liquidity line is possible

The Wali of the Central Bank confirms: the data of the finance law allow the government to face the evolution of the economic situation, as well on the side of the expenses as of the receipts. The Executive also has levers to mobilize additional resources and could even resort to a new precautionary and liquidity line. This drawdown will thus be able to limit the social and economic repercussions of the current situation and maintain an adequate level of official reserves to ease pressure on the balance of payments.

Growth will be revised following the March rains

For the wali of Bank Al-Maghrib, spies are shrouded in uncertainty at an even higher level than during the pandemic. As a result, the Central Bank plans to monitor developments more closely, in order to adapt its monetary policy. “If the situation requires a council meeting before the quarterly meeting, we will do it”, underlined, Tuesday in Rabat, Abdellatif Jouahri at the end of the first meeting of the Council for the year 2022. today will be revised. Because, in terms of the agricultural campaign, they did not take into account the last rains of this month of March. “Of course, cereals weigh 9 to 10% in agricultural added value. But, if the spring crops are saved, it is likely that the revised growth will be 2 or even 2.5%”, he announced. Remember that BAM, without taking spring crops into account, expects an agricultural added value down 19.8%, with cereal production around 25 million quintals after 103.2 million a year earlier.

Policy rate: why the status quo

For Abdellatif Jouahri, two major data favored maintaining the deferred key rate at 1.50%. This is the sluggish growth of 0.7% expected this year after a rebound that would have reached 7.3% in 2021. Added to this is the expected return of inflation to moderate levels in 2023 at 1.9% , after 4.7% in 2022. “We have converged the objectives of controlled inflation with the support of economic activity. Within the Council, everyone was convinced of the reasoning. Consequently, the Council has decided to maintain the accommodative orientation of monetary policy”, specified the head of the Central Bank. According to him, the control of inflation and the evolution of prices, in such an economic situation, gives decision-makers, who are at the same time savers, investors and economic operators, visibility for setting their business plan.
But nothing is certain. If the inflation rate remains at a high level in 2023 with economic growth at 4.6%, the key rate should be changed.

Two levers for mobilizing additional resources

Abdellatif Jouahri estimates that the budget deficit remains practically stable at 6.3% this year, without recourse to an effective amending finance law as well as the position of Fouzi Lekjaâ. “As the Minister of the Budget indicated, the data of the current Finance Act enable the government to deal with changes in the economic situation, both in terms of expenditure and revenue. Therefore, there is no need to present an amending finance law,” said the boss of BAM. Two important measures are indeed affected for the exceptional mobilization of resources: specific financing mechanisms and monopoly revenues. “For innovative financing, 8 billion in additional revenue is assumed to be added to the 12 billion already included in the finance law. In terms of monopolies, the government is counting on an additional 4 billion DH through the OCP, in particular, due to the evolution of international prices”, detailed Abdellatif Jouahri. In his view, these new funds should make it possible to correct the increase in the level of compensation (of around ten billion DH) and to support the agricultural (10 billion DH), tourist (2 billion) and transport sectors ( 2 billion).

Possible recourse to a new precautionary and liquidity line

For the central banker, the government has other options to strengthen its budget. Moreover, international exits are included in the 2022 Finance Act, once the conditions are favorable, particularly on the rate side. “Now, the Treasury may be able to think about another solution: a new precautionary and liquidity line (LPL). With the Russian-Ukrainian conflict and its consequences on energy, food products and basic products, the shock is there to justify the renegotiation of a new LPL”, maintains Jouahri. This drawdown allows the government to limit the social and economic repercussions of the current economic situation and to maintain an adequate level of official reserves to ease tensions on the balance of payments. It should be recalled that since 2012, Morocco has concluded several successive agreements with the IMF under the LPL. It is a precautionary instrument designed to meet the liquidity needs of member countries that have strong fundamentals but still have some vulnerabilities. It allows rapid access to IMF resources in the event of an external shock or deterioration in the global economy.

Rating: No question that Moroccan banks are downgraded!

In the same way as during the Covid-19 crisis, in the current context, credit institutions are called upon to maintain sufficient capital to cope with the effects of the economic situation and thus preserve their ability to grant financing. In 2020, Bank Al-Maghrib had called on banks to suspend any distribution of dividends for the 2019 financial year. consolidated) and provide the results to the Central Bank. Depending on these results, we decide whether or not to authorize the distribution of dividends,” explained Abdellatif Jouahri. “So far, we have not expressed opposition to the establishments that have seized us, because they are within the standards or even beyond, with regard to the prudential indicators”, he added. Bank Al-Maghrib declares to closely follow the implications of the economic situation on the banking system, at the level of the parent companies but also on the network in Africa. “The sector must remain resilient and we do not want the rating of banks to be downgraded,” Jouahri discovered.


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