There is no risk of devaluation, declared on Monday the governor of the Central Bank of Morocco, Abdellatif Jouahri, while expressing himself regarding the liberalization of the local currency, dirham. The head of the Apex bank, also ex-minister of finance in the 80s when the currency weakened impacting the economy, dismissed on that occasion the rumors fueled by commercial banks in the country.

Jouahri gave explicit information about the liberalisation process, and described the move by local lenders as speculative attacks. According to him, the banks recently performed many hedging transactions, and this is why the Central bank had to intervene and monitor them to make sure they did not give rise to the rumors of devaluation.

“I will hold a press conference with the Minister of Finance by the end of June to announce the date for the first phase. Provoking a devaluation of the dirham prior to floating the currency would be counterproductive,” the governor said.

Some months before, the Central bank said it would launch in the second half of 2017, the first phase of the currency flexibility to better resist external shocks. The operation would take place over 15 years.

Regarding the matter, rating agency Fitch Ratings said the reform will have limited impact on the country’s macroeconomic situation, on the banking sector particularly, while adding that there would be no devaluation.

Fitch also said external risks related to exchange rates volatility should be mitigated by significant reserves and IMF’s precautionary and liquidity line. Though they shrank by 44 billion dirhams ($4.49 billion) over the past two months, Morocco’s current foreign reserves can sustain more than six months of imports, according to the Central bank. The decrease in reserves is mainly due to pre-floating speculations and hedging.

Let it be recalled that the dirham is, since 2015, pegged to a basket of currencies, including the euro (60%) and US dollar (40%). The Apex bank or Bank Al-Maghrib to keep the local currency’s value at a favorable level has intervened on the market by purchasing and selling dirhams, when needed.

Fiacre E. Kakpo