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Morocco to receive $3 billion from the IMF to fight the pandemic

Morocco has subscribed since 2012 to the precautionary and liquidity line of the IMF in order to be able to limit the impact of external shocks. Giving the current situation caused by the coronavirus pandemic, Morocco will receive $3 billion from the IMF in an attempt to limit its economic effects on the country. A 1.8% decline in the country’s GDP is expected in the second quarter.

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This picture show a market in Morocco.

Given the current situation, Morocco will use for the first time the precautionary and liquidity line (LPL) of the International Monetary Fund (IMF). The country will borrow an amount of $3 billion from the IMF. The objective is to deal with the consequences of the coronavirus pandemic.

This unprecedented drawdown is “repayable over five years, with a grace period of three years,” said in a statement the kingdom’s central bank, Bank Al-Maghrib. Its mobilization occurs “within the framework of the agreement under the LPL concluded with the IMF in 2012 and renewed for the third time in December 2018, for a period of two years, with the intention of using it as insurance against extreme shocks,” the bank said.

The LPL is an instrument designed “to provide insurance or help resolve crises in a wide range of situations,” the IMF also said on its website. Meanwhile, Morocco has received a $275 million loan from the World Bank for disaster risk management.

Find out more about Morocco’s economy and the effects of the coronavirus pandemic on the country’s financial stability. Download the Born2Invest mobile app and read the latest economic news from around the world.

The economic impact of the new corona crisis in Morocco

In any case, the International Monetary Fund’s LPL system serves as a guarantee for economically fragile countries to reassure international markets. Beneficiary countries often do not need to activate these sums. The kingdom decided to use it at a time when “the COVID-19 pandemic, of unprecedented magnitude, suggests a global economic recession much deeper than that of 2009”, which will consequently impact the local economy, Bank Al-Maghrib argued.

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This recourse “will help mitigate the impact of this crisis on our economy and maintain our foreign exchange reserves at an adequate level.” This sum will be “allocated mainly to finance the balance of payments and will not impact the public debt, which is a first in our financial transactions with the IMF,” the Moroccan institution added.

Mitigating the impact of the crisis

Morocco, which on Wednesday, April 8th, had a total of 1,242 officially reported cases and 91 deaths, has taken drastic measures to limit the spread of COVID-19. At the same time, aid for affected businesses, employees and informal workers has been put in place, through a special fund supplied by public companies and private donations. A draft decree-law adopted on Monday, April 6th, authorizes the government to exceed the limit of external financing provided for in the 2020 finance law in order to ensure its foreign exchange needs.

A key sector of the Moroccan economy, the tourism sector will be greatly affected. This comes at a time when the risk of drought was already worrying the kingdom, which is heavily dependent on its agriculture.

The High Commissioner for Planning (HCP), the Moroccan statistical agency, said on Wednesday, April 8th, it expects a 1.8% decline in GDP in the second quarter, instead of the 2.1% initially forecast before the pandemic. However, the country can count on increasing fruit and vegetable exports as a labor shortage caused by the coronavirus has hit agricultural production in southern Europe.

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(Featured image by stefan_bernsmann via Pixabay)

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First published in LePoint AFrique, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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Angelique Moss is a London-based entrepreneur, writer, and traveller. The world of business, finance, and technology, is her preferred cup of tea. She also writes about the developments and discussions on health, art, luxury and media. A top writer for several Medium publications, she has published hundreds of widely read articles on investing, stocks, global markets, cannabis, and technology for multiple platforms. She is also interested in culture, history, and social affairs.