Public finances: the government wants to renew the $5 billion credit line with the IMF

At the beginning of April 2023, Morocco concluded a two-year agreement with the International Monetary Fund (IMF) under the Flexible Credit Line (LCM), for an amount of $5 billion. To date, the Kingdom has not made any draws on this line, which is mainly seen as insurance against exogenous shocks.

During her appearance on the program “Grand Format-Le360”, Nadia Fettah, Minister of Economy and Finance, did not rule out the possibility of renewing the agreement on the LCM with the IMF.

“We are navigating a world of uncertainty. We have a very important agenda of reforms and investments. So, we have two options: either exercise extreme caution and reduce investments, or continue to manage crises and implement the government program to meet citizens’ expectations», Explained the Kingdom’s financier.

And to add: “The LCM is there to serve as insurance in the event of an accident. We are not intended to use it. This is not a financing line. But it could be in times when there is no other option“.

There is therefore no need to wait for the end of the contract with the IMF (April 2025) to decide on the fate of the LCM. “Yes, we would like to renew it. We must remain humble, because we have seen what has happened in recent years. We have to be ready to continue if ever there is an exit from the track or a difficulty», clearly indicated the Minister of Finance.

Read also: Public debt: Nadia Fettah does not rule out a return of the Treasury to the international financial market

Recall that, since 2012, Morocco has concluded four successive agreements with the IMF under the precautionary and liquidity line (LPL) amounting to approximately $3 billion each. The first LPL was approved on August 3, 2012, and the other three were approved on July 28, 2014, July 22, 2016, and December 17, 2018, respectively. The fourth LPL expired on April 7, 2020, when the authorities purchased all resources available under the LPL to limit the social and economic impact of the Covid-19 pandemic and allow Morocco to maintain an adequate level of official reserves to alleviate pressures on the balance of payments.

“While the LPL arrangements have served the country well in the past, the very strong fundamental institutional frameworks, and economic track record in implementing economic policies, as well as the continued commitment to maintaining these policies in the future, all , justify the transition to an LCM agreement. An LCM agreement would help Morocco meet the challenge of rebuilding economic policy space, while accelerating the implementation of its structural reform program in an increasingly risky external environment.», Underlined the IMF in a press release, following the approval of the LCM agreement, on April 3, 2023.