Morocco News

UPDATE 1-Morocco Cenbank governor says no devaluation in dirham liberalisation

(Adds governors comments)

RABAT, June 20 (Reuters) - Morocco’s central bank will announce the date of the first phase of the plan to liberalise the dirham currency by the end of the June but the reform programme does not include a devaluation, the bank’s governor said on Tuesday.

The North African kingdom has been working with the International Monetary Fund on liberalising its currency as part of a reform package to strengthen its finances.

Late last year, the government said the first stages of a move to a flexible exchange rate would be implemented in the second half of 2017.

“I will hold a press conference with the Minister of Finance by the end of June to announce the date for the first phase,” Governor Abdellatif Jouahri said, specifying the announcement would be made after the Eid al-Fitr holiday next weekend.

“Provoking a devaluation of the dirham prior to floating the currency would be counterproductive,” Jouahri told reporters, denying local media reports about such a measure.

Jouahri previously announced the first phase of the currency flexibility would begin during the second half of 2017.

“Steps will be taken progressively, taking into consideration internal and external elements,” he said regarding the widening of the currency’s official bands for fluctuation - one of the first stages in a flexible exchange rate.

The dirham’s rate is currently tightly controlled via a 60 percent weighting to the euro and 40 percent to the dollar.

On Monday, Fitch Ratings said “the liberalisation of the dirham is likely to have a limited impact on macroeconomic stability in the short and medium term ... Public finances and market access should not be significantly affected”.

Jouahri also said the steep erosion of Morocco’s foreign reserves by 44 billion dirham ($4.49 billion) in the last two months was a result of hedging, anticipation and speculation ahead of the currency flexibility.

Morocco’s central bank kept its benchmark interest rate unchanged at 2.25 percent on Tuesday, saying the current level remains appropriate. The bank, known as Bank al-Maghrib, said it expected inflation to stay at 0.9 percent in 2017 and would accelerate to 1.6 percent in 2018. ($1 = 9.8034 Moroccan dirham) (Reporting by Samia Errazzouki; writing by Patrick Markey; editing by Mark Heinrich)