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    Central Bank Director Admits ‘Disappointment’ in Govt.’s Delay of Dirham Liberalization

    01 Oct 2017

    The dirham liberalization reform dominated Bank Al Maghrib‘s quarterly conference held this September 25. With sober self-criticism and a poignant sense of disappointment, Abdellatif Jouahri dwelled at length on the government’s postponement of the dirham flexibility reform originally scheduled for the beginning of July.

    During the press conference following the quarterly meeting of Bank Al Maghrib Council, the delay of the dirham liberalization reform was the main focus of the questions fired at Jouahri. But according to the Moroccan central bank’s governor, the government alone holds the answers to this delay.

    Usually very discreet on the subject, Jouahri opened up about his “misunderstanding” and “disappointment” at the government’s reluctance to reform the exchange rate regime announced by the Moroccan Head of Government Saad Eddine El Othmani at the end of June.

    Back in late June, Jouahri was about to officially announce the start of the new regime at a joint press briefing with Finance Minister Mohamed Boussaid, but the appointment was eventually canceled for reasons that remained unknown. A week later, however, El Othmani justified the postponement of the reform by citing a “need for additional studies,” to better understand “its impact on the economy and, in particular, on the purchasing power of citizens.”

    However, according to Jouahri, “so far we have not been asked to conduct a particular study on the exchange rate regime.” For the BAM’s governor, the postponement of the reform is primarily political and has been decided by the governmental.

    During the press conference held this September 25, Jouahri denied any appropriation of this reform by the Central Bank: “From the outset, a joint committee was set up to steer the process.” Jouahri recalled that the political management of this issue is part of the prerogatives of the executive, while the Bank only managed the technical components.

    “We retreated not because we did not have prerequisites: fiscal sustainability, substantial foreign exchange reserves, resilience of the banking system, preparation of economic operators, and so on,” explained Jouahri. “Since last March, I have explained that Morocco will initiate this reform voluntarily because it fulfills all the prerequisites.”

    Jouahri also recalled that the BAM conducted 20 meetings with commercial banks, 14 meetings with CGEM (Moroccan employers’ confederation), three awareness campaigns with Moroccans living abroad (MRE) in Paris, Rome, and Madrid and two explanatory meetings with the local press. He also stressed the fact that BAM has the full support of the International Monetary Fund (IMF), which believes that the kingdom is ready to implement this liberalization reform by January 2017.

    For Jouhari, “the problem is that we remained the most transparent possible because Morocco was not in a currency crisis. There was therefore no reason to devalue. This message was repeated to all operators.”

    The governor of Bank Al-Maghrib disputed the argument of bank executives who justify the “abnormal” operations by the demand of the customers. “As a central bank, we have not checked and do not encroach on the powers of the Foreign Exchange Office or on the tax authorities, even if we happen to see certain odd arrangements.”

    According to the Central Bank, one of the reasons for the delay of this reform was the apprehension regarding itself implementing, which the BAM was not expecting since it made sure to present the reform while the country was not going through a monetary crisis.

    Unfortunately, this did not have the calming effect that BAM expected. On the contrary, it sparked fear among the public, due to a lack of understanding fueled by the speculations of some media outlets, which suggested an imminent devaluation of the dirham.

    “Perhaps we’ve took too much time before trying to make the meaning of this reform accessible to the general public. But be careful, we have no other choice but to advance with these reforms,” explained Jouhari.

    One thing is clear for the director: maintaining the currently hiatus is out of question.

    “If the government has postponed this reform to better study and support it, then that’s a positive thing,” he continued.But, “if we want to move towards a better distribution of income [and] the emergence of the economy, the immobility on implementing a flexible exchange rate regime is not a viable option.”

    “If we do not launch these reforms now, they will be harder, if not impossible to carry out later,” warned Jouahri. For now, the ball is in the executive’s camp, the only one with the power to restart the process of liberalization.


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