While the construction of the liberalization of the Dirham is on track, more technical issues arise. It is without doubt the most crucial one.
Morocco can suffer speculative attacks on its currency after its liberalisation ? What are the long-term consequences of a massive output of capital ? Who will “protect” the Dirham and with what tools ? As many of the questions that come back more and more on the front of the stage, parallel to the progress of this reform. Ask these questions is to ask whether Morocco has enough foreign exchange reserves to stem the volatility of the Dirham. The central Bank, participant exclusive in this regulation, advance a line of argument that scientific shared around the world for an answer to this problem.
Our foreign exchange reserves are sufficient ? To defend its currency, Morocco must first ensure that it has sufficient foreign exchange reserves for its current needs. A simplistic method, but is recognized by international institutions such as the IMF and the rating agencies, is to ensure to secure 3 months of imports. All the rest can be used to deal with shocks, including on the currency. But the IMF offers to member States a more comprehensive way, which takes into account several parameters, such as the value of exports, the short-term external debt or the money supply. A mathematical formula, referred to as the Method of ARA plan floating, allows you to identify the reserves
necessary to current needs. According to this method, the rule of adequacy is that the country’s reserves should be between 100 to 150% of the optimal reserves necessary to cover these common elements. Morocco is in this range since 2016. In fact, the foreign exchange reserves estimated for the year of 259 billion dirhams, or 102% of the need. In 2017, the Bank Al-Maghrib expects the level of reserves of 282 billion dirhams, or 105% of the need. Theoretically, therefore, Morocco is currently around 50 billion dirhams in addition to face to an exogenous shock; this is what is more commonly called the budget intervention. To give you an order of ideas on the quality of this reserve, it is necessary to know that during the last oil shock the post-american financial crisis, Morocco has had to put on the table 30 billion dirhams of its reserves to stem the increase of course. In other words, the Kingdom has enough resources to cope with a shock that is at least equivalent to a barrel to over $ 140. Another element in favor of the authorities in the conduct of this reform lies in the small risk of a speculative attack, given the local character of the Dirham. In front, a flight of capital massive, for one reason or another, cannot bring the economy to its knees. Because, according to the calculations of BAM, only 2% of foreign capital invested in Morocco are liquid (invested in financial products), with the remainder placed in the real economy and could not leave the national territory on a whim. But these statistics theoretically in our favour should not be an excuse for passively to submit to this reform. The authorities and the private sector must work for upgrading the quality of exports, chronic trade deficit by reminding us of every time that Morocco is far from being competitive. What are these macroeconomic aspects which are the real cushion for the protection of the currency in the longer term.
By A. Hlimi
Understand the method of ARA to the reserves of foreign exchange
The optimal level of foreign exchange reserves, as suggested by the method ARA advocated by the IMF, uses two methodologies. The first concerns the fixed exchange rate regime and the second regime floating. For the regime, floating, the method is the following : Plan floating ⇨ 5%*X 30%*DCT 5%*M2 15%*REC (X : value of exports ; DCT : short-term external debt ; M2 : money supply (M3 in the case of Morocco) ; REC : other liabilities to non-residents. In the case of Morocco, the reserves of 2016 are 102% of the need. The method ARA adjusted gives even more margin in Morocco.