Unique interview with Roberto Cardarelli, IMF: the Moroccan financial system between resilience and challenges

In a world context marked by successive crises, Morocco stands out for its financial resilience. Mr. Roberto Cardarelli, chief economist of the IMF mission in Morocco, offers us with an in-depth evaluation of his establishment’s current report on the Kingdom. On this interview, he addresses the strengths and weaknesses of the Moroccan financial system, the affect of the drought on the labor market, and the structural reforms needed to make sure sustainable development. Implicit in his responses are additionally the views and proposals of the IMF to help the steadiness and financial growth of the Kingdom.

La Nouvelle Tribune: Mr. Cardarelli, the IMF has simply launched its 2024 report on the Moroccan financial system, which it considers resilient to the adverse shocks of 2023, are you able to inform us about it?

M. Roberto Cardarelli: Resilience is an evaluation of the Moroccan financial system primarily based particularly on its macroeconomic and macro-financial knowledge.

This considerations, on this case, Morocco’s exterior steadiness, its funds deficit and its overseas forex reserves which have improved significantly in comparison with 2020, the 12 months of Covid. Likewise, the nation’s public debt has stabilized, following a path of gradual discount. It needs to be famous that such outcomes weren’t straightforward to realize as a result of the affect of the shocks that hit the nation was very vital. Particularly because the worldwide scenario and in Europe, its predominant accomplice, have been marked by vital difficulties. With out forgetting that the drought which has set in lately constitutes a brand new main shock for Morocco.

Certainly, on this side, we can not communicate of resilience. Particularly because the labor market scenario is significantly linked to local weather change. The agricultural sector has skilled numerous job losses inflicting a deterioration within the general unemployment charge, whereas our report, in its evaluation of inflation between 2020 and 2023, notes a drastically lowering charge, which went from 10% to 2%.

It should be acknowledged that if from the standpoint of the macroeconomic context, we communicate of resilience, structural issues stay.

With the pressing investments imposed by the drought and the burden of social reform on the general public funds, it’s true that it’s tough for Morocco to maintain its funds balanced sooner or later. On this regard, I remind you that the conclusions of the IMF report relate to 2023 knowledge, ensuing from the financial, budgetary scenario and financial coverage on the finish of 2023.

However our consultations across the mission of Article 4 solely happen every year, whereas the dialogue we now have with the Moroccan authorities is steady. It permits the IMF to observe the relevance of the nation’s resilience and monetary sustainability and assess its prospects. As we speak, we’re already revising our projections for the 12 months 2024.

Making certain management of the exterior steadiness and the funds deficit doesn’t promote development, which is crucial for the creation of jobs and the financing of the main investments that Morocco is planning. All nations on the planet are in debt, so why cannot a rustic like Morocco proceed to take action to finance its development?

Progress is the principle downside, and together with employment are Morocco’s structural issues. Once I discuss resilience, it should be understood from the macro-financial facet. Structurally, the nation’s issues are clear.

And they don’t date from this 12 months, they’re identified and the authorities are very conscious of the scenario, as proven by the brand new growth mannequin, which is a imaginative and prescient of change within the high quality of development.

Nonetheless, this didn’t foresee the extent of the drought, the affect of local weather change and specifically the water scenario.

It is vitally tough to foretell on this space, the brand new growth mannequin itself has not taken 100% of those penalties under consideration.

Then again, the issue of development is taken under consideration by the brand new mannequin in query, which advocates extra public funding, in infrastructure, extra function of the State, by public firms, and the necessity to develop the non-public sector, to create extra jobs throughout the financial system. As you realize, there are various reforms on this route. That of public enterprises, the funding constitution, the Mohammed VI Fund for funding, progress of which is gradual, and the outcomes can be progressive.

As a result of the structural issues are very advanced and concern a number of elements: taxation, entry to credit score, human capital, governance, regionalization, and many others.

Mr. Cardarelli, is Morocco’s financial development not established over time? What are the IMF’s suggestions to spice up it within the medium and long run?

Macro stability is a needed situation for development. Even when it’s not sufficient. There’s a distinction between needed circumstances and adequate circumstances!

Macroeconomic stability falls beneath this distinction. Actually, stronger development than the three.4% charge we now have forecast is important to proceed. And, as I mentioned, it is vitally tough for us to consider the affect of structural reforms on the financial projection within the subsequent 5 years. Relying on the implementation and progress of reforms, we are able to higher assess the habits of financial development. We hope to have the ability to appropriate this charge upwards by 3.24%. Though our projections are for the following 5 years, reforms proceed and lots of of them are effectively superior.

Mr. Cardarelli, how does the IMF assess the structural reforms carried out by our nation? And in your opinion, that are an important?

Certainly ! We’re following the rise in non-public funding whereas figuring out that the big investments anticipated are public. These referring to regionalization, infrastructure, electrical energy, transport and tasks linked to the 2030 World Cup. To do that we all know that financing will more and more be PPP, public-private partnerships!

The event of the non-public sector, with the target of a transition in direction of a regime the place two thirds of investments can be non-public and one third public, the alternative of what has been the case till now, will take time. ; it will not occur from one 12 months to the following, a number of issues have to vary for such a growth. Actually, that is the problem that Morocco should meet.

The latter has demonstrated up to now its means to make vital adjustments.

This was the case for industrial emergence with the introduction to Morocco of the automotive, electronics and aeronautics professions which enabled the resilience of its exports and contributed to the steadiness of its exterior account.

Confronted with the rise in imports, the exterior steadiness is resilient because of exports from new professions which carried out effectively in 2023, contributing decisively to the nation’s resilience. Morocco has thus confirmed its capability to make adjustments.

If we examine the present construction of Morocco’s exports to that of 20 years in the past, we see that it has been reworked! Phosphate is the one issue of continuity, it took 20 years to make such adjustments.

The event of the nation should be steady, that is an important factor! Reforms will take time however they’re going in the correct route.

And social reform specifically, how does the IMF understand it?

We wrote clearly in our 2023 report that welfare reform is a vital part of structural reforms. It constitutes the implementation of half of all reforms. Each its first half, which considerations the generalization of AMO, and direct social help, household allowance which has been reworked into direct social help.

These are the explanation why the advance within the budgetary scenario has been very gradual. And we now have mentioned clearly that the gradual discount of the funds deficit and the general public debt is important to supply the means to finance social safety reform.

It is about discovering a steadiness between budgetary management and financing social reform, these are the 2 predominant goals at the moment!

Particularly because the retirement reform and unemployment profit tasks should observe. The IMF is engaged with the Moroccan authorities in a dialogue to help them. As a result of social reform doesn’t solely concern training but in addition social safety.

Mr. Cardarelli, what would you say to us in conclusion?

Confronted with drought, it’s important and important that Morocco continues to implement the nationwide water plan with the development of desalination crops and different needed infrastructure. That is the precedence at the moment, together with for financial development.

In our projections, we spotlight that funding and home demand will, within the coming years, take over from exports as the principle engine of development.

Interview carried out by Afifa Dassouli