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Liberalisation of Dirham: Morocco Is Ready For The First Phase

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The Bank Al- Maghrib is expected to announce this week the date of the first phase of liberalisation of the dirham, a reform supported by the IMF to strengthen the economy of Morocco.

At the end of last year, the central bank said that the first steps in a gradual transition to currency controls at a flexible exchange rate would be implemented during the second half of 2017, as well as other reforms such as “the targeting of inflation”.

Abdellatif Jouahri, governor of the central bank, said he would release the start date by the end of June but denied the rumor about a devaluation of the dirham. According to central bank data, foreign exchange reserves fell by $4.4 billion in the last two months. Foreign exchange reserves stood at 218.5 billion dirhams (10.8% lower than last year).

This first step will have to allow the currency to float in a narrow range, which will gradually develop over the next few years.

A recent example of a country that adopted a similar policy is Egypt which abandoned its exchange rate in November and started a flexible exchange rate regime. This has reduced the cost of living as the value of the Egyptian pound has halved. But Morocco has done more than other North African countries in adopting economic reforms, curbing its deficit, halting fuel subsidies and blocking the hiring of the public sector.

Moreover, Jouahri made it clear that Morocco is not in a crisis situation and that this decision is voluntary. “The dirham is not misaligned and we will go to the floating exchange rate regime without any devaluation of the dirham,” he added.

He said a press conference after Aid el Fitr would be held with the finance minister to announce officially  the exact date of entry into force of this reform of the flexible dirham exchange rate system In the month of July.