Analysis: Floating the dirham is not in favor of Moroccans Politics and Economy -

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For decades, the International Monetary Fund (IMF) has been demanding that Morocco float its currency, the dirham, on the pretext of boosting Morocco's competitiveness and making it more vulnerable to external shocks. The IMF justified its decades-old demand for a successful previous step to make the exchange rate more flexible as of January 2018. The move included allowing the Moroccan central bank to expand the circulation of the dirham against the euro and the dollar to 2.5 percent up and down against the reference price, Before the competent monetary and financial authorities.

Official and popular rejection

The demand of the new fund – the old under various names has been rejected even by the government, which is a friend of this international institution is notorious in Morocco and abroad because of the harsh conditions of its loans. Among Moroccan experts and public opinion, there is almost unanimous agreement that the float of the Moroccan currency at this time is rejected as inappropriate and carries enormous costs that more than double the gains made. Economic expert Najib Aksabi goes so far as to warn of a spiral of Moroccan currency and of the Moroccan economy, which is still fragile to withstand the shock of floating the dirham.

A fragile economy can not withstand the shock

In an interview withThe expert talked about some aspects of this vulnerability such as the dependence of Moroccan agriculture on climatic conditions and the weakness of the diversity and flexibility of the export sector in a way that helps to increase in the event of a decline in the price of the dirham and Moroccan goods became cheap for a country like Germany. More than a third of Moroccans are employed in agriculture and alone account for 15 percent of GDP.

Deutsche Welle Ibrahim Mohamad (- / P.Henriksen)

Ibrahim Mohamed: Floating the currency leads to more poverty in the absence of a social safety net as is the case in the West

Moreover, Morocco and the expert's speech does not have sufficient reserves in hard currency to bear the high costs of imports and servicing the external debt resulting from the decline in the price of the currency after liberation, especially if it is speculated because of the lack of confidence in its stability. Morocco imports almost everything, including energy sources from the gas and oil, which are dependent on its supply abroad almost entirely.

The German Trade and Investment Organization estimated Morocco's external debt at the beginning of 2018 at about $ 50 billion against a reserve of less than $ 23 billion. The external debt ratio accounts for more than 45 percent of GDP. Let's not forget that floating the currency and lowering its price against rising consumer prices means further deterioration of the standard of living of the majority of Moroccans who are poor or low-income people. Morocco is among the world's most unequal countries.

Good indicators are not enough to float

For these reasons and arguments that do not encourage the floating of the dirham, Morocco has a good investment climate that has attracted significant investments in the automotive industry, aircraft parts, renewable energies and other manufacturing industries over the last 10 years. It enjoys political stability and is close to the European Union, where it has a wide range of partnership and commodity exchange agreements. These and other features call to question whether the opponents of the idea of ​​floating on the right?

No doubt, floating a coin in a country that depends on the grace of heaven in its cultivation and on imports in saving its consumption and suffering from social differences will be painful and cruel at first. However, the fruits of the flotation will emerge after two or more years, as happened in Egypt, whose currency was minted in autumn 2016. Less than three years later, these fruits began to appear through many indicators. The most significant of which is the decline in inflation rates from 33 percent then to less than 10 percent at the moment. Foreign exchange reserves increased to more than $ 49 billion against less than $ 40 in 2015. Growth rates have clearly risen to between 4.3 and 5.3 in the last three years, down from 3 percent in 2015.

Marokko Chouara-Gerberei in Fes (picture-alliance / NurPhoto / A. Widak)

Many Moroccan industries such as the textile industry are unable to compete in the international market because of their obsolete technologies

The Egyptian experience is not a model

However, the expert believes that the judgment on the Egyptian experience is still early, because it takes 10 to 15 years. Egypt's conditions are not comparable to those in Morocco. For example, Egyptian agriculture is stable because it depends on Nile water. In addition to the expert's opinion, Egypt has additional sources of funding and external assistance, especially from the United States, Saudi Arabia and other Gulf countries, which finance many projects there politically and politically. Let us not forget that Egypt has reduced the bill of energy imports to the extent that it has been transformed within two years from a gas importer to a country of origin. This is due to the start of the exploitation of the field, "noon" marine gas, which is a reserve of 30 trillion cubic feet of the largest fields in the Middle East.

Ibrahim Mohamed

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