IMF Wraps Up 2025 Review, Resilience Talks With Morocco

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded on March 17 the 2025 Article IV consultation ^[1] with Morocco and completed the Third Review under the Resilience and Sustainability Facility (RSF) arrangement, which was approved in September 2023 (see PR 23/327). The completion of the Third Review allows the authorities to draw SDR 375 million (about US$ 496 million), bringing total disbursement under the RSF arrangement to SDR 937.5 million (about US$ 1.24 billion).

In 2024, the Moroccan economy was resilient to yet another year of drought. Robust domestic demand helped offset weak agricultural output and economic activity is expected to have slowed only modestly to 3.2 percent in 2024. The current account deficit widened somewhat, whereas unemployment remained elevated at about 13 percent, mainly reflecting the impact of job losses in the agricultural sector. GDP growth is expected to accelerate to about 3.7 percent over the next few years, supported by a new series of infrastructure projects and the continued implementation of the structural reform agenda.

Inflation decelerated further in 2024, mainly as the impact of supply shocks faded. This prompted Bank Al-Maghrib (BAM) to lower the policy rate twice in June and December. The dirham continued to move within the fluctuation band of ±5 percent.

The central government fiscal deficit improved more than envisaged in the 2024 Budget. The 2024 overall deficit closed at 4.1 percent of GDP, about 0.2 percent of GDP less than projected in the 2024 Budget. This reflects better-than-expected tax revenues that more than offset higher spending. The reform of the Organic Budget Law envisages the introduction of a new fiscal rule based on a medium-term debt anchor.

The implementation of the announced structural reform agenda has continued. Further steps were taken to restructure SOEs, operationalize the Mohammed VI Investment Fund, and implement the new Charter of Investment.

Morocco continued to make progress in bolstering its resilience to climate change under the RSF arrangement. Measures implemented under the third and final review of the RSF arrangement aim to better protect underground water resources, prepare the ground for a change in tariffication of water, improve the regulatory setting of the electricity market to encourage private sector's production of renewable energy, and reinforce fiscal and financial systems' resilience to climate change-related risks.

Following the Executive Board's discussion on Morocco, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, issued the following statement:

"The Moroccan economy continued to show resilience to negative shocks, a testament to the country's very strong economic policies and frameworks. Despite renewed drought conditions, economic activity slowed only modestly to an estimated 3.2 percent in 2024, down from 3.4 percent in 2023, thanks to robust domestic demand. GDP growth is expected to accelerate to about 3.7 percent over the next few years, driven by a new cycle of infrastructure projects and the continued implementation of the structural reform agenda. These reforms are essential to making growth stronger, more resilient, job-rich, and more inclusive.

The RSF arrangement concluded with the implementation of six of the seven measures scheduled for the third and final review. These measures will help improve the management of scarce water resources, further liberalize the electricity sector, and address the climate risks on the stability of the fiscal position and the financial system. The gradual introduction of the carbon tax was not implemented as the authorities needed to undertake further analysis of its impact and deeper consultations with public and private stakeholders."

Executive Board Assessment ^[2]

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the resilience of the Moroccan economy to challenging domestic and external conditions, supported by very strong policies and policy frameworks and continued progress on structural reforms. While the economic outlook remains highly uncertain, continued prudent macroeconomic policies and further implementation of structural reforms are expected to support economic activity going forward.

Directors welcomed the authorities' commitment to fiscal consolidation and the improvements in the fiscal framework. Noting the impressive revenue overperformance generated by past reforms, they encouraged the authorities to save at least part of the revenue windfall and implement additional structural measures to increase revenue and rationalize spending. This would support a faster rebuilding of fiscal buffers and ensure a stronger protection against risks. Directors commended the authorities' intention to support the expansion of private sector investment through the new Investment Charter and to rely more on public private partnerships to meet the country's large investment needs. They advised the authorities to report the budgetary implications and risks from these strategies in the Medium-Term Fiscal Framework. Directors also welcomed the authorities' commitment to introduce a medium-term debt anchored fiscal rule to further reinforce the fiscal framework.

Directors supported Bank Al-Maghrib's monetary policy stance and agreed on the need for a cautious data dependent approach. They broadly concurred that the central bank should take advantage of the expected stabilization of inflationary pressures to resume its planned transition to an inflation targeting framework and carefully remove the peg as conditions allow.

Directors welcomed Morocco's progress in aligning its financial supervisory and regulatory framework with international standards. Noting rising risks from NPLs and bank concentration they suggested the introduction of a secondary market for NPLs and welcomed the authorities' request for an FSAP update.

Directors commended the authorities' commitment to the structural reform agenda to support job rich, private sector led growth. This would require further improving the business environment, enhancing market competition, including by reforming state owned enterprises and reducing their presence outside of strategic sectors, and continuing the fight against corruption.

Directors welcomed the authorities' strong performance under the RSF arrangement, which included important reforms in the water and energy sectors. Noting that significant actions have already been taken to introduce a carbon tax, Directors acknowledged the authorities' decision to postpone its initial implementation to allow for additional impact analysis and consultations. They also underscored the need for further progress in defining the regulatory framework for renewable energy production and improving the grid's capacity to secure private sector participation.

It is expected that the next Article IV consultation with Morocco will be held on the standard 12-month cycle. 

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .